Organisational culture – often Invalid?

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Article by Richard D. Lewis

 

Organizational culture is a buzz-term of the early 21st century. The rampant globalisation of business in recent times has spawned a vast and seemingly endless amount of literature analysing and exploring its theoretical viabilities. But a word of warning: since a high percentage of these commentaries derive from Anglo-Saxon perspectives, they risk being misdirected or even meaningless to members of other cultures such as Japan, China, France and Germany. Companies in these countries can only be ‘organised’ when approached through the prism of their powerful national traits.

 

Phases of Organisation, Richard Lewis

 

In this era of vigorous globalisation of business, it is not surprising that “Organisational Culture” has become a buzz-word, enkindling a vast amount of literature attempting to describe and define it.   In the References section of his admirable book, “ Organisational culture and Leadership,” Edgar H. Schein lists 237 books and papers written between the years 1950 to 2010, of which 107 were published in the 1990s and the 21st century. Most, though not all, of these works are of Anglo-Saxon authorship. They deal with many aspects and perspectives – mergers and acquisitions, organisational leadership, cultural intelligence, leadership effectiveness, transitions and transformations, corporate architecture, strategy and structure, behavioural expectations, organisational science, decision-making, culture change in family forms, the global challenge, cognitive dissonance, executive mindscapes, management consulting, cross-cultural competence, psychodynamics of organisational life, leading business teams, culture gaps, evolution and culture, organisational symbolism and so on.

The literature deals with a variety of organisations, mainly in the sphere of private enterprise, some with state ownership or intervention. Since the turn of the century, joint ventures as well as mergers and acquisitions have grown apace. Bigger and bigger companies have demonstrated appetite for growth. Even big names like Jaguar, Nokia and Alcatel have been swallowed up. In the UK, huge British-owned industries such as textiles, automobiles, ship-building and coal-mining have almost disappeared. Survival of the fittest (or biggest) seems to be the order of the day. In the midst of such transformation and transition, the organisation or re-organisation of the companies involved (often giants in their field) is a subject of great importance and no little fascination. Can two strong corporate cultures develop compatibility? How do they seek best practice? Edgar Schein and others have confronted and analysed a plethora of issues that arise in a company in transition, whether in a merger or simply improving / transforming its structure. The current literature on organisational culture offers a series of possible solutions and (dare I say?) not infrequent recommendations surrounding such issues.

It is understandable that the issues presented are ones that normally arise (though not only) in an Anglo-Saxon environment and consequently are discussed (usually in the English language) from an Anglo-Saxon perspective. In the opinion of this writer, such a perspective is invalid when a strong non-Anglo culture (Japan, France) is involved, particularly in an M&A situation, where transformative measures encounter reluctant or negative acceptance. Given the current and future economic preponderance of China, India, Japan, Germany and possibly South America, one has to take into consideration that organisational culture precepts, as commented on in current literature, are often non-applicable, even meaningless, in cultures comprising four-fifths of humanity.

The numerous authors referred to above have not failed to take into account the influence of national characteristics in multinational business, but the often cursory manner in which these are mentioned suggests that these embedded traits are grossly underestimated by writers who have only second-hand experience of cultures other than their own. I have worked 5 years inside an American corporation, 5 years inside a French multinational, 5 years in a Finnish company, 5 years in a Portuguese one, 2 years in a German broadcasting company (Deutsche Welle) and a dozen more dealing with major firms in Sweden, Spain, Italy, Brazil, Denmark and the United Arab Emirates. With all of these, I would say that the models of organisational culture described or proposed in ninety percent of books on the subject are inappropriate, mis-directed or bear little relevance to all the countries I have worked in, with the exception of the United States, Finland and Denmark.

Which elements of company organisation are we talking about? They are, of course, innumerable, and can be looked at from different angles (e.g. customer-orientation or measurement of success). However, Schein and others commonly refer to the following issues (a selection):

hierarchy criteria of success communication style Dress
layers of authority incentives face use of space
command & control punishments disagreement use of time
empowerment expectations brainstorming rolling forecasts
types of leaders appraisals feedback working hours
decision-making promotion error detection individualism
consensus loyalty code of ethics sub-cultures
mission statement baronies whistleblowers human rights

Without imposing a personal interpretation on how writers on organisational culture treat these issues, I find that their descriptions do not stray far from the routines I was subjected to during my 5-7 years employment with 2 sizeable US corporations. It went a little like this:

Hierarchy is adhered to in most American firms, but officers would describe themselves as ‘democratic.’ Layers of authority would be restricted in number – the pyramid would be flat and wide rather than tall and narrow. Command and control sounds all right, but empowerment is OK too. American managers leading a subsidiary abroad are expected to make decisions ‘standing on their own two feet,’ but are, in fact, controlled by a strict 3-month rolling forecast to HQ. US leaders in general are expected to make firm decisions without unnecessary delay. They are not too concerned about consensus among colleagues, but they will ‘take the rap’ if they err. Expectations of work rate are high for employees and incentives and punishments are often effected through bonus systems. Inefficient employees are ‘let go’ (which means fired).

Appraisals are common and promotion is on the line. A certain amount of loyalty is expected, but American individualism and career ambitions are taken into account. The communication style between leaders and colleagues is essentially direct. In the US, you ‘tell it how it is.’ This may involve challenging a decision made by a senior colleague, certainly applicable to error detection, irrespective of whether someone loses face or not. In such cases, Americans usually acknowledge mistakes readily, so loss of face is infrequent. Disagreement in US firms is also direct, often expressed without rancour. Brainstorming is popular and common, innovative ideas are welcomed. Whistleblowers can be admired, rather than demonised. Dress varies according to the company code, but office employees must be scrupulously clean and considered smart. Americans are used to working in ample personal space – offices are generally light and airy, crowded conditions frustrate. As for the use of time, Americans are very punctual, work hard and will stay late at work in times of crisis in the firm. Sub-cultures are tolerated equally and human rights, in accordance with the Constitution, are a given. It is worthy of note, however, that Americans willingly accept that duties come along in tandem with rights (which is not the case in some other countries).

*****

In 1966, I was sent to Japan to establish a branch of an American multinational in Tokyo, I stayed 5 years there, eventually opening 6 offices in Tokyo, Osaka, Kobe and Yokohama. It did not take me long to realise that I had entered a different world and that Japanese companies are run in a completely different way from US firms or, for that matter, those in any other country. If we go through our table of issues and see how they impact Japanese people, we will discover the following:

The concept of hierarchy, trumpeted by the sage Confucius in 1500 BC, is firmly implanted in Japanese society and applies equally to family life, business companies and government. If there are 100 persons in a firm, each one will know his number or rank and will instruct or obey accordingly. If you are number 98, you will take orders from 97 people of higher rank, particularly from no. 97, who may well be taking care of your development. In turn, you will advise numbers 99 and 100. Hierarchy is decided by longevity – age or how long you have been with the company. If a batch of people joined in the same year, age will count. If two people are the same age, the date of their university degree will decide. There are strict layers of authority: Shacho (CEO), Bucho (senior director), Kacho (junior manager), Kakari-cho (section chief). Command and control is the norm in Japanese companies, full empowerment is rarely granted, except for minor assignments. Leaders of corporations tend to be dignified, often aloof, and are not involved in day-to-day operations, as many American managers are. A Japanese president is expected to set guidelines for the next year’s activities and later to ratify proposals which filter upwards from kachos and buchos for approval. Decision-making in Japanese companies seems shrouded in mystery, particularly to foreign executives who negotiate with them. Decisions which take a week or a month with Americans may drag on for 6 times as long with Japanese firms, who often seem to decide on a course of action when all other options are no longer viable! The collective nature of Japanese people means that consensus is valued at all levels, though seniors often exert pressure. Collectivism also impacts systems of incentives and punishment: individuals may not be seen to benefit from personal bonuses. Such rewards must be conferred on the department e.g. to which a crack salesman belongs. Accountants, too, play their part in sales! Expectations with regard to new recruits are always high, as loyalty and work ethic are taken for granted. Periodic appraisals are not popular in Asian companies. Promotion will be achieved in due course, not based on exceptional performance, but on longevity, departmental loyalty and obedience. Criteria for promotion causes problems for Japanese companies. What can one do to promote a brilliant performer aged 25-30? He is destined, whatever his talents, to accept guidance (and orders) from men in their forties and fifties. He simply cannot be promoted above them. The corollary is the mediocre manager in his forties or fifties who is blocking the upward mobility of younger men with superior intellect. What can be done? In the US, Britain and Australia, young stars are simply promoted and rewarded. This cannot be done in Japan and some other Asian countries.

I was fortunate enough to be befriended, during my own sojourn in Japan, by Akio Morita, the then president of Sony. He was an outstanding, but atypical, Japanese executive, well-known among foreign managers and with acute insight of Western practices in business. He confided to me how he dealt with the promotion dilemmas referred to above. “I cannot promote young stars officially, neither can I give them big salaries or impressive job titles. My best advertising man is 28 years old and has the title of 2nd assistant in the packaging department. His pay is modest, but he knows that my door is always open to him and I listen carefully to all his ideas. I have given him scholarships to spend one year in the United States and plan another year for him in Britain and Germany. Of course, he has introductions and a generous expense account,”

I asked him, “What do you do with your less talented fifty-year-olds?” He answered, “We keep them away from the real business. Some of them we train to be good golfers. We call them Vice-presidents and they entertain visiting American Vice-presidents for days on end. Older ones manage Sony buildings in Tokyo – we rent out many to foreign firms.”

In Japan, loyalty to one’s company is rarely discussed, as it is taken for granted. Appointment to a reputable Japanese firm is regarded as a job-for-life. Loyalty is to one’s kaisha (company), which is often referred to as uchi (home). Fidelity feeds straight through to the President. This is fairly common in Asia, though in China baronies are often created, which affect the chain of command.

The communication style between managers and subordinates in Japanese companies is quiet, subdued, polite and indirect in comparison with that in Western companies. Orders are issued very often in the form of hints (“Perhaps we should tidy up the office” or “We might try to put a call in to Coca Cola today.”) Underlying all forms of instructions, suggestions, criticism or reprimand is the vital question of FACE, which affects all matters of control and compliance in Japanese society. For this reason, superiors invariably communicate with subordinates in a courteous, often paternal, tone and manner. Disagreement is disguised as possible consent (“I suppose that could be true.”), the word ‘no’ is absent in Japanese business. Subordinates always know when there is a difference of opinion and quietly comply (with a smile). Quite a difference from American and Australian discourse!

Brainstorming, so popular in the US, Britain and the Netherlands, is almost impossible to achieve in a Japanese company, where employees simply have no wish to air their views in front of superiors. Feedback in response to exhortation is normally minimal. Disinclination to challenge views or decisions of superiors is quite contrary to US or Canadian practice and can cause problems in error detection or willingness to admit defects in production (Toyota late recalls in 2014).   Whistleblowers in Japan are unpopular. The Fukushima affair has cast serious doubts concerning the code of ethics at higher levels in large corporations.

As persons, the Japanese executives, or ‘salary-men,’ appear boringly uniform compared with Westerners. Nearly all wear a grey or dark blue suit, white shirt and unexciting tie. Their lack of individualism gives foreigners the impression that they behave like a shoal of fish, arriving at work on time, swimming in the same direction, staying on at their desk till the sector leader goes home. This is no criticism of their behaviour. Working side-by-side with Japanese men and women can be a harmonious and rewarding experience. Sub-cultures hardly exist in Japan, as they do in the US, and tolerance is high as long as one follows the rules. Questions of human rights are barely discussed: one’s job is one’s job.

*****

This quick survey of life in a Japanese company indicates that procedures, aspirations and conduct have little in common with Anglo-oriented firms, except perhaps a disciplined, civilized pursuit of wealth in the form of company profits. Even here, goals differ. While quarterly profits, demanded by shareholders, are often the target in US corporations, Japanese firms see progress more in enlarging their market share (Toyota vs Nissan etc) therefore guaranteeing steady profits at a later stage.

The organisation of a Japanese corporation is ideologically, structurally and culturally inherently different from the Anglo-Saxon model. Any work outlining or proposing maxims and solutions in the sphere of Organisational Culture cannot afford to ignore or neglect the potent lessons to be learnt from the powerful currents of implacable collectivism, intrinsic harmony, patience and stamina, nurture and tenacity, deference , theism, ambiguity and long-termism that flow from Asian and other durable cultures around the world.

*****

In terms of organisational structure, it is not only in Asia that we find models that diverge sharply from the Anglo-Saxon. Germany, too, is a world of its own. The spectacular failure of the DaimlerChrysler merger revealed startling cultural differences between Germans and Americans. One assumed that certain comforting commonalities such as a driving work ethic, a linear approach to tasks and keen results-orientation would facilitate smooth integration. This was a fallacy. An intercultural meeting of the minds never took place. Misunderstanding and miscomprehension were rampant. The merger triggered the loss of billions of dollars as the share price plummeted. Where did German norms fail to calibrate with other Western ones?

Scanning our approach to organisational issues again, we discover the following:

Hierarchy is much stricter and more firmly established in Germany than in America or anywhere else in Western business. Layers of authority are distinct. The hierarchical pyramid is much steeper than in most cultures. Communication in a German company is vertical rather than horizontal. Orders are passed downwards to the person immediately below you. Instructions are rarely horizontal; cross-departmental communication is rare and may be frowned upon. US firms usually have strictly centralized reporting. Large German companies often feature decentralization and compartmentalization. Each department reports vertically to its head. Departmental rivalry is much more acute than in most countries.

Germans are class-conscious. Senior managers are usually intellectuals. In classless America, intellectuals are often called ‘egg-heads.’ Decision-making in America often features spontaneity, flexibility and adaptability. Germans give pride of place to well-tested procedures and processes. If these structures have brought the company so far, why change things? In Germany, consensus carries more weight than Anglo-Saxon individualism. German collectivism is almost as potent as Asian. Criteria of success is not based on profits but on the relation of debt to equity. Incentives for employees may involve bonuses but tend, as in Asia, to recognize departmental achievement. Loyalty is expected in German companies and job tenure is lengthy. Both upward and horizontal mobility is less than in the US. Step-by-step hierarchical promotion is slow but sure. In Germany, there is no substitute for experience. The most qualified person in this regard is likely to be on the highest rung of the ladder.

Germans have their own distinct communication style. Entering a room, they are initially unsmiling; though they relax afterwards, their attitude remains formal. Greetings are with surnames and official job titles. There are many Doktors in Germany. Orders are given crisply and factually. Context is always provided. Germans like to know why they are embarking on a certain course of action and why at this time. Humour and charisma are often both lacking at this stage (at least in American eyes). Germans ask serious questions to which they expect serious answers (not always provided by North Americans, Brits and Australians). Brainstorming is a rare event in a German company, feedback from staff is limited. Working for Deutsche Welle, I noticed that my German colleagues, though friendly enough, were quick to pounce on any mistakes I made. After a while, I realised that constructive criticism is expected in German corporations. It is personal, but seen as helpful to the individual (to avoid future mistakes). Some of my French and British co-workers were offended by such directness. Japanese and other Asians find it unacceptable. Germans express disagreement openly, shunning Brit-style coded speech or Italian diplomacy and are consequently accused of lacking in tact by many nationalities.

German executives dress in good quality, generally new, clothes and expect others to do the same. They are jealous of their personal space and are non-tactile. Seniors have large, private offices and generally keep the door closed. They love privacy, especially in a work situation. They lack American gregariousness, where people wander from office to office to exchange ideas (“How’s it going, Jack?”). As far as the German concept of time is concerned, it is extremely linear. They wish to complete every phase before going on to the next one. They could be described as slow and steady, do not like to be rushed. US-style 3-monthly rolling forecasts they generally despise, considering the interval too short to be meaningful. They prefer to write a detailed annual report. As far as working hours are concerned, Germans like to finish at 5 and begin their leisure time. They prefer to separate as clearly as possible their working and private lives. They are, of course, diligent workers and excellent planners. Human rights are important for them, though they rarely shirk from related responsibilities.

Most German enterprises conform to the national reputation. Ordnung (orderliness) is perhaps the most important word in their language. German Ordnung is more orderly than its British or American equivalents. It demands orderliness in the home, the office, one’s general environment, one’s car and other possessions, neatness of dress and accessories, orderliness of one’s social manners, working habits – above all, orderliness of mind. When all these condiditions have been fulfilled, one can say, “Alles in Ordnung,” This is almost a definition of German organisational culture! It is their version and they may be reluctant to abandon well-tried, proven processes that have served the nation well in the past. Many German firms have lengthy manuals prescribing how tasks should be carried out. Re-organising or re-structuring a German firm entering a merger will have to take into account the nation’s bureaucratic realities and deep-rooted national caution.

*****

France has a distinct and durable national culture which strongly impacts the nature of French enterprises and makes them less amenable to change and external indfluence. French self-esteem parallels and equals that of the Americans or Chinese. French self-centredness resides in the belief that French are intellectually superior to others and that they are the flag-bearers of European civilisation. They resent the replacement of French by English as the language of international trade and diplomacy. French business norms are very different from Anglo-Saxon ones; they use English less than any other Europeans, except the Spaniards, and they distinguish themselves at international conferences by being the last signatories to agreements concluded by organisations such as WTO, OECD etc. Their persistent anti-Americanism and distrust of Anglo-Saxon precepts make French executives poor candidates for organisation change or adaptation in mergers and acquisitions.

French corporations are as hierarchical as German, often even more so. While German CEOs frequently sound out opinions emanating from unions and the factory floor, the French President-Directeur-Général brooks little opposition to his directives. Most French CEOs, especially those of big corporations, are alumni of France’s elite business schools, HEC and Ecole Normale Supérieure. They bring with them the appropriate cultural baggage – a sense of history, deep respect for culture and language, elegant theories of business and administration and an in-built suspicion of and distaste for Anglo-American commercialism. Such Chief Officers make all major decisions – consensus is often assumed rather than sought. Errors are frequent but CEOs are rarely fired. The assumption is that the best-qualified man (or woman) was elected in the first place, so change will not improve things. The system has proved detrimental to French business, but criteria for success is not based on profits. The reputation of the company is the primary concern and the government has shown little hesitation in times past when bailing out iconic firms such as Renault and Citroen. Incentive systems have more to do with correct behaviour than profits, and promotion is linked to cronyism and ‘old boy’ networks. French communication style is essentially Latin in character. Discourse is long, rambling and digressive. Agendas are rarely ahered to and conclusions are postponed to the end of the day. It is often said of the French that they will not agree to anything until they have agreed to everything. The speech style is eloquent, oratorical, often charismatic. They are stubborn negotiators, re-state their opinions and positions, shy away from compromise, which they regard as Anglo-Saxon wheeling and dealing. Their obstinacy and long-windedness can be exasperating for pragmatic Brits and Scandinavians. Their strength is adherence to logic. They consider that they, better than anyone, have a holistic approach.

Disagreement is open rather than diplomatic. Brainstorming is OK, though presidents impose their views. French business people have their own code of ethics and tend to disregard others’. They rival Italians in dressing smartly, they are relatively punctual but can be finicky about working hours. Their 35-hour week has gained them few friends. They are lukewarm about US-style statistics, rolling forecasts and personal appraisals. To be French is to be an individualist with one’s own personal views on sub-cultures, ethnic issues and human rights. They are sometimes less than successful in dealing with their sizeable minorities, but seek little advice from others.

The primacy of national culture and nation-state traits

This summarised survey of one or two non-Anglo cultures shows deep-rooted core beliefs which form the basis of mind-sets that diverge sharply from those of North Americans, British, Australians and New Zealanders. Japanese, Chinese and French are all convinced of their intellectual and cultural superiority and the Germans are not far behind. Then there are El Mundo Español and O Mundo Lusitano, whose adherents number 500 million in South America alone. These powerhouses of culture evince little or no inclination to be Americanized, Anglicised or Organised by anybody else. Mergers and acquisitions abound and many of these are multinational but few acquired entities surrender their corporate culture. Microsoft has not taken the Finnishness out of Nokia. The other way round, neither has Tata (Indian) taken the Britishness out of Jaguar and Land Rover, nor has Volkswagen completely Germanised Rolls Royce!

It is natural that writing of books on organisational culture have a worthy aim in trying to create a model for modern, smoothly-running companies. Re-organisation is obviously imperative in the case of M&A, but where two cultures are involved, no meaningful organisation can be achieved without first attending to the problem of conflicting national traits. Organisational Culture procedure is necessarily a two-phase operation. Phase One is the analysis and (attempted) alignment of both companies’ national characteristics. Phase Two is the organisation of this alignment. The order of the two phases cannot be reversed, otherwise planners are whistling in the dark.

(to be continued)

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