GLOBE Study of Leadership for Multinationals | Free Essay Example

GLOBE Study of Leadership for Multinationals

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Introduction

Effective leadership is considered essential in the development of nations and institutions. Although organizational leadership is a universal concept, its attributes and effectiveness differ across cultures. The multi-phase GLOBE study sought to define how culture shapes leadership efficiency in organizations (House et al. 2004). The large-scale project drew data from over 17,000 managers drawn from different sectors in 58 nations globally. Based on a consensus, leadership was defined as the capacity of a person to “influence, motivate, and enable others” to play a central role in their organizations (House, Javidan & Dorfman 2001, p. 494).

The project sought to establish leadership characteristics and behaviours considered essential in effective corporate governance by all cultures globally. In this view, it examined this topic from different perspectives and theories, including the “implicit leadership theory, cultural theory, implicit motivational theory, and the structural contingency theory” (House, Javidan & Dorfman 2001, p. 497).

The results of the GLOBE have wide-ranging implications for cross-cultural leadership. Multinational enterprises (MNEs) could utilize this study to create a cultural fit between the expatriate manager and the staff for organizational effectiveness. Also, the findings could inform knowledge transfer between different cultures. This paper examines the implications of the GLOBE project findings for multinational corporations with a presence in 12 different countries.

The GLOBE Project and Societal Cultures

The GLOBE study evaluated 62 societal cultures grouped in 10 clusters (House et al. 2004). They included cultures from Western and Northern Europe, North America, Sub-Saharan Africa, Southern Asia, and Latin America, among others. The culture was defined as a set of common “values, beliefs, identities, and interpretations” ascribed to a particular group (House et al. 2004, p. 19). The project evaluated the business-oriented societies based on nine cultural dimensions, namely, power distance, performance orientation, institutional collectivism, gender egalitarianism, uncertainty avoidance, in-group collectivism, and future orientation, assertiveness (House et al. 2004).

The respondents were drawn from diverse industries, including banking and ICT. The findings are based on the respondents’ reported perceptions of the dominant values and behaviour in culture. The project aims to formulate theories and models describing the cultural factors that affect leadership efficiency in diverse organizations. The 62 societal cultures exhibited differences in the nine dimensions stated. Most notably, the South Asian cultures scored high (first rank) in power distance (PD) and in-group collectivism and low (position 7) in uncertainty avoidance (UA) (House et al. 2004). Additionally, institutional collectivism, UA, and future orientation were higher in S. Asian cultures than in Nordic European societies (House et al. 2004). These cultural divergences have managerial implications for expatriate leadership effectiveness and knowledge transfer between cultures.

The Core Dimensions of Societal Cultures

Performance Orientation

GLOBE’s performance orientation evaluated the degree to which a culture encourages improved performance and creativity (House et al. 2004). Cultures considered to possess high-performance orientation are characterized by training and development, competitiveness and materialism, regular performance appraisal, and explicit communication (Tuulik & Alas 2003). On the other hand, societies with low power orientation exhibit strong family ties, concern for the environment, negative perception of performance feedback, and subtle communication (Tuulik & Alas 2003).

Performance orientation was found to be higher than average (>6.17) in Latin America (El Salvador, Venezuela, and Argentina), Eastern Europe (Slovenia), and S.E. Asia (Philippines) (House et al. 2004). A culture’s degree of performance orientation determines the effectiveness of the managers. Exceptional leaders emphasize performance orientation, which means that they appeal to the charismatic leadership style. Other styles that emphasize on performance include participative and autonomous leadership approaches (Kennedy & Mansor 2000).

Uncertainty Avoidance (UA)

The GLOBE study defined uncertainty avoidance as the degree to which a culture utilizes “social norms and procedures” to address unforeseen events (House et al. 2004, p. 21). It indicates how individuals perceive unforeseen situations and the measures they take to alleviate it. Societies with high uncertainty avoidance scores tend to formal, meticulous, and resistant to change. The average score for the US in this dimension was 4.15 compared to the average of 4.0 in Portugal (House et al. 2004). South Asian countries have a low UA score, implying a propensity to make quick decisions.

A high tendency to avoid uncertainty is linked to the team-oriented leadership style. Steyer, Hartz, and Schiffinger (2006) write that societies with an inclination to reduce uncertainty tend to value humane or team-oriented styles. Further, they exhibit self-protective behaviours, which enable them to lower uncertainty.

In-Group Collectivism

In-group collectivism is considered a key trait of successful organizational leaders in most societies. It is the level of loyalty and pride exhibited by group members (House et al. 2004). The cultures with high in-group collectivism are characterized by a strong in-group/out-group attitude, focus on duties and obligations, and emphasis on relatedness (Steyer, Hartz & Schiffinger 2006). In North America (US), the average score in this dimension was 4.25, which is less than the value of 5.77 in Russia (Eastern Europe), Spain (Latin Europe), and Turkey (Middle East).

Power Distance

Power distance describes the extent to which a culture “endorses authority or status privileges” (House et al. 2004, p. 16). Societies with high power distance are often differentiated into socioeconomic classes, show limited mobility upward, and have hierarchical power systems (House et al. 2004).

Gender Egalitarianism

This dimension measures the value placed on gender equality in society. Egalitarian cultures have more women occupying influential positions, lack gender segregation in the workplace, and exhibit equal educational attainment for men and women (House et al. 2004).

Humane Orientation

Societies with humane orientation tend to reward altruistic behaviour and kindness. They are characterized by selflessness, a strong sense of affiliation, concern for the wellbeing of others, and non-discrimination (House et al. 2004).

Institutional Collectivism

It describes the actions and practices meant to support collective goals. Collectivist societies exhibit strong group loyalty, in-group equity, and shared decision-making (House et al. 2004).

Future Orientation

It describes the extent to which a society focuses on future-oriented behaviours. Future orientation is characterized by a strong focus on long-term success and flexibility and adaptability (House et al. 2004).

Assertiveness

It focuses on how individuals relate or interact with others. Cultures with high assertiveness tend to emphasize competition, direct communication, and individual initiative (House et al. 2004).

Managerial Implications of the Findings

The GLOBE findings indicate that power distance varies between S.E. Asia and Nordic Europe. Southeast Asian countries include the Philippines, Malaysia, Indonesia, and India, among others. The mean cultural distance between the two cultures comes to “4.3 and 6.0 for As-Is and Should Be”, respectively (House et al. 2004). Thus, the possibility of cultural exchange between the two cultures is low. A study by Chhokar, Brodbeck, and House (2007) showed that culturally distant societies have a low propensity to share or adopt new practices and skills. Also, the perceived cost of acquiring new practices may hamper the exchange of knowledge and practices.

The GLOBE project finds a significant cultural distance between S.E. Asia and Nordic Europe. The cultural distance ranges between 4.4 and 6.0 (House et al. 2004). In contrast, the average cultural distance between countries in S.E. Asia and China ranges between 3.1 and 3.7 (House et al. 2004). On the other hand, East German and Nordic countries (Sweden and Denmark) have a mean distance of between 3.4 and 2.7. Therefore, the two nations have comparable scores in most cultural dimensions, including institutional collectivism and power distance.

The study is based on the tenets of the implicit leadership theory, which states that people develop perceptions about leadership behaviour and attributes as they grow up (Resick et al. 2006). An individual’s set of beliefs about the qualities of a leader are implicit. Therefore, the differences between cultures may affect what people consider effective leadership. The cultural environment, interactions, challenges, and religious values influence the implicit beliefs of a group. The project developed the culturally endorsed leadership theory that captures the characteristics and skills that the 61 societies considered essential ineffective leadership. These include charismatic/value-based, team-oriented, participative, ‘humane oriented’, self-protective, and autonomous.

Charismatic Dimension

The GLOBE study associated the charismatic approach with effective leadership. It encompasses the capacity to “inspire, motivate, and expect high performance” from others (House, Javidan & Dorfman 2001, p. 491). Charismatic leaders are transformational because they inspire a particular strategic direction. The characteristics associated with transformational leadership include charisma, self-sacrifice, decisiveness, and performance orientation. GLOBE’s findings show that all cultures surveyed rated charismatic style between 4.5 and 6.7, implying that this dimension is considered crucial in leadership (House et al. 2004).

In this respect, data from the project showed that North American countries (Canada and USA) strongly linked charismatic leadership with effective leadership. At the same time, nations in the Middle East indicated the lowest association (5.35). Thus, charismatic leaders should head North American subsidiaries and less charismatic ones to the Middle East branches.

Team Oriented

This dimension emerged in second place in the GLOBE study. Team orientation is considered an important leadership trait globally. It entails the leadership focus on building cohesion within a team to attain the set objectives. According to Resick et al. (2006), leaders with the team-oriented attribute are collaborative, diplomatic, and positive-minded. The 62 societies examined rated team orientation between 4.7 and 6.1, indicating that this attribute is considered essential in effective organizational leadership worldwide (House et al. 2004). Across regions, Latin American countries (Guatemala, El Salvador, Argentina, and Brazil, among others) place a high value on team orientation. In contrast, the Middle East countries had the lowest value (5.47). This finding means that, for effective organizational leadership, managers in Latin American countries require a team-oriented approach.

Participative

Participative leaders engage others in decision-making. They are less autocratic and consider the input of subordinates when making major decisions. In the GLOBE project, this dimension was rated between 4.5 and 6.1, which is higher than the average value of 4.00 (House et al. 2004). This finding implies that a majority of cultures consider the ‘participative’ dimension a key indicator of effective leadership. Across cultures, the nations in the Germanic Europe cluster, i.e., Germany, Australia, Switzerland, and the Netherlands had the highest ‘participative’ score (5.85) (House et al. 2004).

In contrast, the Middle East countries (Turkey and Kuwait) had the lowest score (4.96) (House et al. 2004). The US had the highest score in this dimension. A study by Kennedy and Mansor (2000) found a positive correlation between participative leadership and staff productivity. Therefore, managers should employ the participative approach when leading organizations in North America and Eastern Europe.

Humane Oriented

Another dimension identified by the GLOBE project is humane oriented leadership. It describes the support and generosity accorded to others in a team setup. The study associated humane orientation with modesty and humanistic concern by leaders. In the survey, the cultural societies rated this dimension between 3.8 and 5.6 (House et al. 2004). This rating shows that humane orientation is a moderately significant quality of effective leadership. Countries in S.E. Asia (the Philippines, India, Singapore, Malaysia, etc.) gave the highest score (5.37) for this dimension (Kennedy & Mansor 2000).

In contrast, Nordic European countries (Denmark, Sweden, and Finland) recorded the least value (4.42) inhumane orientation. In this view, MNEs should give priority to humane oriented programs, such as CSR projects, when operating in South Asian countries.

Self-protective

Resick et al. (2006) define self-protective leadership as the focus on the “safety and security” of team members (p. 366). Self-protective leaders are egoistic, value face-saving, and are status-conscious (Resick et al. 2006). Thus, leaders with this trait tend to avoid criticism or unfavourable judgment. They can go to great lengths to protect their public image and social standing. In the GLOBE project, the 62 cultures rated this dimension between 2.5 and 4.6 (House et al. 2004). Countries in S.E. Asia and Confucian Asia gave a moderate score of 3.84 on the self-protective dimension. The Middle Eastern countries also neutrally viewed self-protective leadership.

In contrast, the Nordic Europe cluster gave a rating of 2.71 on self-protective leadership. Thus, these cultures consider the self-protective trait an impediment to good leadership. In this view, expatriate managers in S.E. Asia should exhibit a self-protective trait to promote leadership efficiency.

Autonomous

The autonomous dimension describes the independence and individualism in leadership (Resick et al. 2006). It is associated with independence or self-reliance. The dimension was rated between 2.3 and 4.8 by the 62 cultures surveyed (House et al. 2004). This rating implies that most cultures consider autonomy suppressive to effective leadership. Eastern Europe (Russia, Poland, Slovenia, etc.) gave the highest rating (4.1) on this dimension (House et al. 2004). Germanic Europe gave the second-highest rating of 4.14 while Latin America gave the lowest rating (3.51) in this respect. The findings imply that managers from Eastern Europe value autonomy in leadership, while those from Latin America consider autonomy a hindrance to effective leadership.

Implications for Knowledge Transfer

In the era of globalization, internalization is a key competitive strategy for firms. The internal skills, knowledge, and core competencies inbuilt in a firm’s processes or structures constitute a vital source of its competitive advantage. The cross-cultural transfer of these skills and knowledge requires effective communication between groups. However, because organizations embody the cultural values and behaviours, the dominant culture would manifest in the employees’ practices and behaviour.

Cross-cultural exchange of expertise, especially in leadership/management, can be affected by cultural differences. Leadership skills tend to be culturally determined (Papalexandris & Galanaki, 2009). Therefore, factors such as power distance and uncertainty avoidance may affect the successful assimilation and utilization of foreign leadership principles. Barriers to knowledge exchange can affect leadership effectiveness in overseas subsidiaries. Leadership effectiveness depends on leadership styles, which differ across cultural clusters based on the nine dimensions.

The cultural dimensions identified by GLOBE implications for knowledge transfer within MNEs. The willingness of an individual to learn new skills and tacit knowledge from expatriate managers may be influenced by his or her culture. In particular, institutional and in-group collectivism can impede or promote knowledge transfer. Leaders from in-group collectivist cultures, e.g., the US, may prefer to share skills with individuals of their group as opposed to outsiders.

Such managers would be unwilling to build strong relationships with people from a different culture (Papalexandris & Galanaki, 2009). In comparison, leaders drawn from cultures with significant institutional collectivism would foster integration and sharing of skills across the organizational structures. Therefore, having a manager with a high level of institutional collectivism would lead to improved collaboration and knowledge transfer within the organization.

Large differences between cultures can also impede cross-cultural communication. Language is one of the barriers to communication. Most unit leaders lack a good knowledge of English, which makes it difficult to transfer skills across borders. Also, disparities in cultural practices can hamper the organizational learning process. As Glisby and Holden (2002) write, communication can be impeded when the sender comes from a “high uncertainty culture” and the receiver is from a “low uncertainty avoidance culture” (p. 3). In this case, the sender will use “organized or structured communication forms” while the receiver will choose “informal and unstructured methods” (Glisby & Holden 2002, p. 5). The SE Asian countries, e.g., the Philippines, have a low UA score, which indicates a disposition to make sudden decisions.

Effective leadership also entails support for continuous organizational learning. The absorptive capacity of the receiver depends on the existing knowledge within the organization. Based on the knowledge management theory, organizational learning is a gradual process that builds on prior knowledge (Glisby & Holden 2002). Therefore, a successful introduction of new concepts or processes builds on the expertise existing in the organizational memory that enables the receiver to understand the new practices. The individual may lack the motivation to learn new ideas or processes that do not relate to the current practices. Therefore, the absorptive capacity of the receiving culture can hamper the effectiveness of leadership in a cross-cultural context.

Cultural differences between the sender and the receiver can also hamper knowledge exchange. Knowledge transfer is easier between cultures, exhibiting a high level of similarity in terms of practices and belief systems. Such cultures tend to have shared cultural meanings that make the receiver to be more receptive to new skills or practices (Kennedy & Mansor 2000). Therefore, to manage the cross-cultural transfer of skills effectively, managers should identify common goals and performance metrics beforehand. Also, constructing cultural profiles based on the GLOBE data could help determine the best ways of addressing barriers to effective knowledge transfer.

People from different cultural societies may share certain values or beliefs that could be exploited for cross-cultural interaction and collaboration. For example, cultures in SE Asian cultures and Nordic Europe deviate in terms of UA, in-group collectivism, and power distance (Hofstede 2001). However, the two cultures have comparable human orientation and performance orientation scores, which could be exploited as a basis for interaction.

Conclusion

The GLOBE project identified ten cultural clusters with different scores on the nine cultural dimensions. The findings constitute a useful tool for managing MNEs operating in different regions. The GLOBE results indicate the key similarities and differences between societies worldwide. Therefore, the findings have managerial implications for managerial decision-making, knowledge transfer, and leadership effectiveness.

References

Chhokar, J, Brodbeck, F & House, R 2007, Culture and Leadership Across the World: The GLOBE Book of In-Depth Studies of 25 Societies, Lawrence Erlbaum, Mahwah, NJ.

Glisby, M & Holden, N 2002, ‘Contextual constraints in knowledge management theory: The cultural embeddedness of Nonaka’s knowledge-creating company’, Knowledge and Process Management, vol. 10, no. 2, pp. 1–8.

Hofstede, G 2001, Culture’s consequences: International differences in work-related values, Sage Publications, Inc., Thousand Oaks, CA.

House, R, Hanges, P, Javidan, M, Dorfman, P & Gupta, V 2004, Leadership, culture, and organizations: The GLOBE study of 62 societies, Sage Publications, Inc., Thousand Oaks, CA.

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Tuulik, K & Alas, R 2003, ‘The impact of the values of top managers upon their subordinates values’, Journal of Business Economics and Management, vol. 4, no. 2, pp. 105-114.