Executive Summary
The influence of globalization is evident in all aspects of the business environment. By facilitating business collaborations and agreements between different countries, this phenomenon created opportunities for companies to enter new markets and multiply their profits as a result. Similarly, the advancement of information technology enhanced the global reach of businesses, allowing them to hire employees from all around the world.
Due to both trends, diversity has become among the most widespread concerns for managers of virtual teams. This is mainly because when managed inadequately, cultural diversity can harm the organization and interpersonal relationships in teams. However, with the right approach, the management can make accommodations for people from varying backgrounds, thus fostering a positive corporate climate and effective collaboration.
The subject of cross-cultural management has become particularly relevant in this context as it assists in identifying differences in values, customs, and communication styles evident in various cultures. Understanding these differences is of critical importance to managers who want to increase the productivity of diverse virtual teams. Cultural awareness can lead them to create new human resources management strategies that would be welcome by people from various cultural backgrounds. Therefore, cross-cultural management is beneficial both for organizations and for employees, as it allows them to achieve their full potential in work.
After discussing the context and justifying the need for cross-cultural management, the present paper focuses specifically on cultural differences in leadership, motivation, communication, negotiation, and decision making. These are analyzed based on three specific cross-cultural models: Hofstede’s theory of cultural dimensions, Hall’s contexting theory of culture, and the model of national culture differences by Trompenaars and Hampden-Turner. As evident from research, all of these theories allow assessing and explaining cultural differences and their application to the international business context allows creating recommendations for leaders with regards to managing virtual teams.
Introduction
Globalization is a crucial phenomenon in the contemporary world that has a significant impact on businesses working in all industries. In particular, international businesses are now required to cooperate with people and institutions in various countries to enhance their position in the global market. As a result, more and more companies are opening branches in different countries and employ residents. This creates a need for studying and implementing cross-cultural management to overcome cultural barriers and foster effective collaboration between diverse workers. As this paper will seek to show, understanding national culture and using it to create cross-cultural management strategies is vital in the contemporary global business environment.
Background
Several fundamental forces have influenced the need for cross-cultural management. First of all, globalization had a crucial effect on many businesses, leading them to expand to new locations and partner with institutions and companies from all around the globe. According to Gavusgil et al. (2014), globalization refers to the process of national markets becoming more and more integrated and interdependent. For instance, many markets in developed countries, such as the retail clothing market, now depend on the supply of raw materials and human resources from developing countries. Nike is an example of a company that relies heavily on production facilities in developing countries, such as Indonesia, Vietnam, Taiwan, and Malaysia.
Additionally, globalization influences companies’ operations by providing them opportunities to sell products in other countries and creating conditions for helping international businesses prosper. Various trade agreements between countries enable businesses to enter new markets without paying a significant amount of taxes (Cavusgil et al. 2014). While this trend helps many international businesses to establish a global presence, it also affects competition in domestic and global markets, which means that success is only available to companies with strong strategy and management.
Secondly, the advancement of technology has facilitated the development of international business by offering opportunities to communicate and connect with people from all over the globe. It also established an environment for the creation of virtual teams, which are often comprised of individuals from diverse countries and backgrounds (Lilian 2014). Therefore, even managers who work for domestic companies are now required to understand group dynamics and management strategies for diverse teams.
As a result of these processes, cultural diversity has become a prominent trend in contemporary business management research and practice. Depending on the management’s approach, it can have both positive and negative influences on a business. For example, as noted by Lilian (2014), diversity can impair communication within teams and result in low trust among teammates, thus influencing team performance and productivity. Moreover, negative attitudes of some employees to members of other cultures can lead to tensions and various forms of misconduct, including harassment (Begeç 2013).
Nevertheless, when diversity is effectively managed, it can have a positive influence on many workforce factors. Including members of different cultures in the same team can improve innovation and idea generation by inviting more perspectives (Bačík & Turáková 2018).
Diversity also enhances performance, which is a particularly important factor for international businesses. As noted by Foma (2014) diverse workforces usually benefit from improved motivation and job satisfaction, which contribute to goal achievement and productivity. Hence, the effect of diversity on individual and company performance depends on the management’s ability to overcome cultural barriers and build strong teams. In this context, the subject of cross-cultural management gains significance, because it can assist managers in planning an effective strategy for motivating, inspiring, and preventing conflict in diverse teams.
Cross-cultural management is a relatively new concept that evolved due to the need for solutions in international business. The purpose of cross-cultural management is to enhance the understanding of challenges faced by management in the context of globalization and internationalization and to create practical solutions for managing diverse teams (Thomas & Peterson 2017). It involves “accommodating differences in cultural practices when managing outside of one’s home country and it often takes a comparative perspective” (Bird & Mendenhall 2016, p. 115).
This means that identifying cultural differences and their influence on business management processes and operations is among the main focal areas in cross-cultural management. This approach can help managers working in diverse teams or in international settings to achieve performance goals and maintain a healthy organizational climate.
Cross-Cultural Theories
With the rise of cross-cultural management as a subject field in business studies, many scholars have put forward theories that identified and explained cultural differences among people and applied this information to management. Today, these theories form the foundation of cross-cultural management as they enable leaders in different business settings to enhance the effectiveness of their teams. The principal theories that are widely studied in cross-cultural management are Hofstede’s theory of cultural dimensions, Hall’s contexting theory of culture, and the model of national culture differences developed by Trompenaars and Hampden-Turner.
Hofstede’s Theory of Cultural Dimensions
Hofstede’s theory of cultural dimensions is among the most influential works in cross-cultural management, because it examines specific cultural aspects, thus allowing to draw a comparison between two or more nations. Hofstede’s theory was first introduced in 1980 and it sought to compare cultures by their work values (Thomas & Peterson 2017).
This allowed the researcher to create a classification of cultures in terms of six key domains: individualism versus collectivism, indulgence versus restraint, femininity versus masculinity, power distance, uncertainty avoidance, and long-term orientation (Thomas & Peterson 2017). As a result, this theory is particularly relevant for cross-cultural management because it can highlight differences between cultures, thus allowing a manager to change their approach based on the target culture.
Hall’s Cultural Contexting Theory
Hall’s contexting model of culture is focused on communication as a specific aspect of life influenced by cultural differences. According to Hall’s models, all cultures can be classified in one of the two categories: high-context or low-context (Cardon 2008). In high-context cultures, communication relies mostly on the physical context or the internalized meaning and little information is transmitted in the actual message (Cardon 2008).
On the contrary, in low-context cultures, people draw information primarily from the message, with little to no internalization (Cardon 2008). While this theory is relatively narrow in comparison with Hofstede’s, it provides crucial insight for managers willing to communicate messages to employees of varying cultural backgrounds. According to this theory, messages should be adjusted to the target culture based on its classification to promote effective communication (Cardon 2008). This practice enables managers to change their communication style based on the context, thus ensuring that the staff will understand the message correctly.
National Culture Differences Theory by Trompenaars and Hampden-Turner
Another prominent model in the field of cross-cultural studies was developed by Trompenaars and Hampden-Turner in 1963. This model is somewhat similar in its form and scope to Hofstede’s theory because it also considers cultures in terms of several dimensions. Trompenaars and Hampden-Turner (2011) focus on seven key domains in analyzing and comparing different cultural contexts: universalism versus particularism, individualism versus communitarianism, neutral versus emotional, specific versus diffuse, achievement versus ascription, sequential versus synchronous and internal direction versus outer direction.
Scholars argue that by applying this model to different cultural backgrounds, it is possible to underline cross-cultural differences and prevent or overcome cultural barriers in collaboration (Trompenaars & Hampden-Turner 2011). Therefore, this theory is also useful to managers working in international business settings, as it enables them to tailor management strategies to a particular context.
Comparison of the Theories
The three theories presented above all had a significant influence on cross-cultural management studies. However, they differ in their content and focus, which affects their application to practice. For example, Hall’s cultural context model focuses on a single aspect of cross-cultural management and thus it cannot be used to create a comprehensive strategy for managing an international workforce (Cardon 2008). Theories of Hofstede and Trompenaars and Hampden-Turner, on the contrary, can be used as a framework for designing an approach to human resource management, which would focus specifically on one or more cultures (Thomas & Peterson 2017; Trompenaars & Hampden-Turner 2011).
While both of these theories discuss specific dimensions that differ across cultures, they have a different focus. Hofstede’s theory can be best described as the one that classifies cultures by their inherent characteristics, whereas Trompenaars and Hampden-Turner consider the effect of culture on various values and traits of an individual (Thomas & Peterson 2017; Trompenaars & Hampden-Turner 2011).
For example, the power distance considered by Hofstede reflects the degree of class inequality and people’s acceptance of it (Thomas & Peterson 2017). Trompenaars and Hampden-Turner (2011), on the other hand, include the degree of emotionality and attention to detail in their framework. Based on these specifications, it is possible to suggest that the application of the two models would be slightly different. Hofstede’s model would be particularly useful in designing a management strategy for a company employing people from specific cultures. The model by Trompenaars and Hampden-Turner (2011), in turn, would be beneficial for identifying a correct approach to a particular person or a group of people, as well as for analyzing organizational dynamics in the international context.
Implications for Practice
As evident from the discussion, the theories described above can assist managers in enhancing their understanding of different national cultures. Based on these theories, the management can assess cultural differences evident in international virtual teams and create an approach to overcoming barriers to collaboration. In particular, these theories will be useful in addressing cultural differences related to leadership, motivation, communication, negotiation, decision-making, and organizational relationships.
Leadership
Culture has a significant effect on leadership because it impacts people’s values and needs concerning management. Hofstede’s framework is the most useful cross-cultural model for understanding cultural differences in leadership styles because it includes the concept of power distance (Thomas & Peterson 2017). Power distance varies across cultures and impacts the attitude of people to authority and social inequality.
This is particularly applicable in leadership, as people’s acceptance or rejection of authority can influence the degree to which a person accepts the leadership of someone who has a higher position in a company. When comparing two different cultures by their power distance, it is evident that different leadership approaches are required in each case. According to the country comparison tool provided by Hofstede Insights (2018), the United Kingdom has a much lower power distance than China. This means that people from China would react positively to authoritative leaders, whereas British people would prefer a leader who is more open, friendly, and acts as part of a team rather than an authority figure.
The framework by Trompenaars and Hampden-Turner (2011) can also contribute to leadership in international settings by helping managers to understand changes in people’s perspectives on power. One of the domains assessed by this framework is achievement versus ascription, which means that some cultures attribute authority based on achievements and others do so based on ascription (Trompenaars & Hampden-Turner 2011).
Understanding cultural differences arising from this is critical for a manager who is willing to establish their position as a leader. Depending on the culture of the target group or group member, a manager can focus on showing either their qualifications and achievements or their years of experience and connections (Trompenaars & Hampden-Turner 2011). Tailoring self-presentation to the values evident in the target culture can help a manager to assert their authority and establish a leading position in an organization.
Motivation
Motivation is a rather complex notion that is also influenced by several cultural factors. For example, when applying Hofstede’s cultural model, it is evident that people’s motivation depends on the degree of their individualism or collectivism (Thomas & Peterson 2017). When considering cultures that are characterized by high collectivism, such as China, managers must emphasize how a specific process or activity will be good for the community, the organization, or the society. People from collectivist cultures are also likely to show more engagement and motivation while working in a group (Thomas & Peterson 2017).
In individualist cultures, on the other hand, the emphasis is placed on personal development, and managers should take this into account when assigning tasks and creating motivational strategies. A job that would be inspiring to a person from an individualist culture is the one that would result in their career, professional, or personal development.
National culture differences discussed by Trompenaars and Hampden-Turner are also helpful in evaluating the factors that motivate different employees. The most important cultural aspect here is the internal direction versus the outer direction. While scholars usually attribute this dimension to organizations and their role in the market, they mention that it can also define whether a person relies on inner motivation to complete tasks or requires rigorous external control (Trompenaars & Hampden-Turner 2011).
For instance, in some cultures, like Japan, people have a high inner motivation to commit themselves to professional growth, thus accomplishing career goals. In other cultures, like Brazil, people rely on the external direction and can only complete tasks successfully if there are strict guidelines and supervision. Choosing the correct approach to an individual or a group based on this idea can assist managers in creating a motivating and committed virtual team. Hence, cultural differences play a significant role in motivation and the understanding of cultural influences can help managers to make their teams more productive.
Communication
When it comes to communication, Hall’s contexting model becomes the most relevant because it highlights and explains different cultures’ needs with regards to communication. When applied to cross-cultural management and virtual teams, the model shows that different strategies are needed to communicate messages to people from high-context and low-context cultures (Cardon 2008). Low-context cultures rely on direct and explicit messages and use minimal internalization and contextualization to understand their meaning (Cardon 2008).
People from these cultures, which include Northern Americans and Scandinavians, often interpret messages regardless of their relationship with the speaker and analyze each message linearly (Cardon 2008). As a result, they require communication to be clear, direct, and objective where possible. In virtual teams, this type of communication should include organizational policies, e-mail notifications, and reports.
High-context cultures have an opposing perception of communication and thus require a different strategy. People from such cultures, including Japanese and Chinese, interpret messages based on their context (Cardon 2008). They put a significant emphasis on interpersonal relationships and the implicit meaning of communication and usually take time to get to know a person before interpreting their message (Cardon 2008).
Therefore, people from these cultures would benefit more from face-to-face communication. This creates problems for managing virtual teams, where this communication method is not always accessible. One possible solution is to ensure the presence of technologies allowing for personal communication, such as video calls. This would allow managers to build positive relationships with employees from high-context cultures, thus facilitating communication.
Other cross-cultural theories also explain communication differences that exist among cultures. For example, in Hofstede’s model, communication can be affected by a certain culture’s long-term orientation, as this domain reflects the appreciation of traditions and customs (Thomas & Peterson 2017). As a result, when persons from countries with strong long-term orientation interact with those from other countries, they expect their customs and traditions to be respected.
In the national culture differences model by Trompenaars and Hampden-Turne (2011), the aspects of culture that can affect communication are neutral versus emotional and specific versus diffuse. If a person comes from a country with a neutral rather than emotional culture, they will expect communication to be the same and would prefer a concise and clear message without sentiments. People from cultures that are considered emotional, on the other hand, would take longer to communicate a message because they also need to build a personal relationship with the other person (Trompenaars & Hampden-Turne 2011).
Similarly, people from specific and diffuse cultures differ by their communication style, which is either based solely on a business relationship between parties or diffused into a personal connection (Trompenaars & Hampden-Turne 2011). As a result, people from specific cultures usually rely on a formal communication style, whereas those from diffuse cultures use an informal style more often to build relationships. Recognizing and understanding these differences can assist managers of virtual teams in choosing the correct way of communicating their messages across to team members.
Negotiation
Communication differences that exist among cultures also have a prominent influence on negotiation. In particular, variations among cultures can impact negotiation in three ways. First of all, differences in customs and traditions can influence the effectiveness of negotiation with people from countries that have a high long-term orientation (Thomas & Peterson 2017). Many countries in Asia, including Japan and China, as well as countries in the Middle East, are famous for striking differences in business etiquette compared to European or Western nations.
These are a result of long-term orientation and thus people willing to negotiate with partners or employees from one of these cultures are expected to show appreciation and knowledge of their business etiquette. For managers to succeed in negotiation, it is thus critical to learn more about the target culture and its customs about business communication.
Secondly, a factor that can influence negotiation is the degree to which members of a particular culture are willing to compromise. According to the national culture differences model, this is greatly influenced by the degree of universality or particularity exhibited by members of each culture (Trompenaars & Hampden-Turne 2011). Scholars note that people from universalist cultures usually show more compliance with rules, policies, and contracts than those who come from particularist backgrounds (Trompenaars & Hampden-Turne 2011).
Particularists, on the other hand, focus more on interpersonal relationships and can be willing to modify contracts if they build a friendly connection with the negotiator (Trompenaars & Hampden-Turne 2011). These differences can be crucial as they influence the outcome of a negotiation. For example, if a manager is trying to negotiate a lower price with a supplier from a particularist culture, they will need to prove that the change will positively affect their long-term business relationship. If a supplier comes from a country that has a universalist profile, however, the manager would need to ensure that the price modification is mutually beneficial, as the relationship alone would not be a convincing reason for the supplier to agree.
Thirdly, culture also impacts negotiation through differences in interpersonal relationships during the negotiation stage. Both Hall’s contexting model and the national culture differences model by Trompenaars and Hampden-Turne show that people from certain cultures are more willing to build personal connections and friendships with colleagues and business partners. For example, interpersonal relationships would be of particular importance to high-context cultures, as well as those with diffuse and emotional profiles (Cardon 2008; Trompenaars & Hampden-Turne 2011).
When negotiating with people from these cultures, it is critical for managers to show openness and friendliness and to avoid rushing the negotiation process. Trompenaars and Hampden-Turne (2011) illustrate this in their book, showing how a disregard for diffuse relationships caused partners from South America to disregard the offer of a U.S. company in favor of the higher-priced Swedish proposal when the negotiators from Sweden took time and effort to build a friendly relationship and get to know the management.
When negotiating with people from low-context, neutral, and specific cultural backgrounds, the strategy should be different. In these cases, managers should seek to offer as many details about a product or service as possible, thus establishing clear communication (Cardon 2008; Trompenaars & Hampden-Turne 2011). Relationships between the two parties are likely to remain purely professional and negotiations will also take less time than with high-context and diffuse cultures. Choosing a negotiation strategy based on cultural differences is crucial to managers because it can have a critical impact on the success or failure of the process.
Decision Making
Approaches to decision-making also vary across cultures, as evident from the national culture differences model. Trompenaars and Hampden-Turne (2011) show that decision-making processes differ in particularist and universalist cultures.
In the former case, decisions are made primarily based on facts, policies, and laws, with little to no deviations from the rule. As a result, the decision-making process in universalist cultures is more linear and predictable in terms of outcomes. In particularist cultures, on the other hand, decisions are made based on the context, which may include facts, previous experience, and interpersonal relationships (Trompenaars & Hampden-Turne 2011). Therefore, the decision-making process here would be more complex and depend on many variables, making it harder to predict its outcomes.
For managers of virtual teams, both cultures have advantages and disadvantages in terms of decision-making. The main advantage of employing people from particularist backgrounds is that managers can influence their decisions by forming close personal relationships. For example, if an employee is considering a job offer from a competitor, friendship with the manager might convince them to reject it. However, hiring employees from universalist cultures is also helpful because it can help to ensure that any decisions made by the employee comply with relevant policies, rules, and regulations. Awareness of cultural influences in decision making can thus be helpful to managers in choosing team members and guiding their decision-making process.
The contexting model of cultures can also assist in explaining differences in decision-making. As shown by Cardon (2008), people from high-context cultures may be slower at decision-making because they require more information to conclude. While this does not necessarily mean that they are indecisive, this feature could obstruct the decision-making process in virtual teams, especially those operating in fast-paced environments.
People from low-context cultures, on the opposite, usually make decisions more quickly and easily because they only rely on relevant factual information (Cardon 2008). Nevertheless, managers need to understand that to make a decision, people from low-context backgrounds might need more information and that it should be communicated clearly and directly to facilitate decision making and avoid confusion. Hence, both cultural contexts require specific consideration when it comes to decision-making processes and managers must understand this.
Conclusion
All in all, the paper showed that understanding natural culture is crucial for managing teams, including virtual teams, in the international business environment for two specific reasons. The first reason is that international business today relies heavily on the collaboration of people from one or more cultural backgrounds. Some companies work with foreign suppliers, some open branches in various cultures, and some employ workers from all across the globe. In the case of virtual teams, employment is not constricted by geographical areas and thus workers tend to be more diverse than in traditional offices.
The second reason is that cultural diversity can have both positive and negative effects on a business, depending on the management’s approach to it. As explained in the paper, cultural differences among people in teams and workplaces impact all aspects of work, from leadership to decision making. Understanding national culture enables managers to choose the most appropriate management strategy, thus allowing them to improve performance, motivation, and commitment of culturally diverse employees in virtual teams.
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