Theoretical background: Hofstede Cultural Dimensions Model
Discuss about the Case Study Report of Hofstede- Cultural Dimensions.
The Board of Directors of the Australian Technical Organization were successful in expanding the business line internationally in New Zealand and Indonesia. The HR policies which were used in the Australian company were also used for both the subsidiaries but the Indonesian subsidiary faced a negative effect.
The report briefs about the HR policies and practices and further goes in a way telling about the problem faced by the company in reference with the Cultural Dimension Theory by Hofstede. A brief about the cultural dimension theory is given further in the report and how the theory can be useful in solving the issue of the organization. The report also explains the recommendations given to address the issues in relation with the theory.
This report is initiated to specifically solve the case of Australian Technical Organization, facing the issue of HR policies and practices which were used same for the parent company as well as the subsidiaries in New Zealand and Indonesia. The HR policies and practices in the Indonesian subsidiary were providing negative effect and to solve this issue, the analysis was initiated.
Thesis: To explain the issue faced by the organization in relation to the cultural dimension theory by Hofstede.
“No theory, no plan, no system of government can assure the success of an enterprise. Only people can do that” (Morita, 2015). Human Resources are used to describe both the people who work for a company or organization and the department which is responsible for managing resources related to employees. Human Resource policies are the formal rules and guidelines that businesses put to hire, train, measure and reward the members of their workforce. The human resource practices are those which improve the workforce so that it ensures a greater level of efficiency, suitability and quality.
Psychologist Dr Geert Hofstede published his cultural dimensions model at the end of the 1970s. Since then, it became an internationally known standard for understanding cultural differences. Hofstede surveyed people working with IBM in different countries and identified four dimensions to distinguish between cultures (Mindtools, 2018). Later, he added two more dimensions into his theory. These dimensions described the relationship between the values and behaviour, with the help of a structure based on factor analysis. This theory studies aspects of culture and rate them on comparison scale. Each country has a scale from 1 to 100 for each dimension. The highest the score, the more the dimension emerges in the culture.
Hofstede Cultural Dimensions Analysis
The original theory of Hofstede talked about four dimensions, namely power distance, uncertainty avoidance, individualism vs. collectivism and masculinity vs. femininity. After conducting studies, he introduced two more dimensions which are long-term vs. short-term orientation and indulgence vs. self-restraint. They affect not only how people with different cultural backgrounds behave, but also the way in which they will behave when placed in a working situation (Anastasia, 2015).
This dimension explains the degree to which members who are less powerful in a society accept and also expect that the distribution of power takes place unequally. Inequality is represented in sense of acceptance. Power distance stands for inequality to the extent to which organizations and societies accept power gaps (Anastasia, 2015).
A high PDI score indicates that a society accepts an unequal, ordered distribution of power, and that people understand their place in the system. On the other hand, a low PDI score means that power is shared and is widely spread, and society members do not accept situations where power is distributed unequally (Mindtools, 2018).
According to the above case of the Australian Technical Organization, in the Indonesian subsidiary, Indonesia scores high on this dimension (score of 78) which means that it is being dependent on hierarchy, unequal rights between power holders and non-power holders, and leaders are directive. Power is centralized and managers count on the duty of their team members. Employees expect to be told what to do and when. Communication is indirect and negative feedback is hidden. High power distance means that Indonesian co-workers would expect to be clearly directed by the boss (Hofstede- Insights, 2018). This explains that because of high power dimension index in Indonesia, the HR policies and practices followed in the parent company did not work in the subsidiary.
It is a dimension that describes the extent to which people in society are not at ease with doubt and uncertainty. It is the extent to which the members belonging to a society are capable of dealing with future uncertainty without going through stress (Anastasia, 2015). In societies that score high for uncertainty avoidance, people attempt to make life as expectable and controllable as possible. While people in low UAI scoring countries, are more relaxed, and open (Mindtools, 2018).
According to the above case study issue, Indonesia scores 48 on this dimension and has a low preference for avoiding uncertainty. Maintaining work place and relationship harmony is very important in Indonesia as no one wishes to be the cause of bad or negative news. Communication is seen to be threatening and Indonesians are uncomfortable with it (Hofstede- Insights, 2018). This again becomes the reason for the negative effect of HR policies and practices in Indonesia.
Power Distance
The focus of this dimension is regarding whether people have a preference for being left alone to look after them or want to remain in a closely joined network (Anastasia, 2015). Organizations that are divided into departments where there is no or less interaction follow individualistic approach. Whereas organizations which have no particular department and people participate in all tasks follow collective approach. It is important to maintain a balance of both approaches (Lobo, 2018). A high score represents ‘loose’ contacts and little sharing of responsibility. The individuals value the time of people and respect for privacy. A society with low score would have a strong group relation, a large amount of loyalty and respect for members
According to the case study, Indonesia scores the lowest ranking of 14 with a collectivist society. This means there is a high preference for a strong structure where individuals are expected to obey to the principles of the society and in- groups to which they belong. For example, if one wishes to marry, it is important to meet the family of woman because the family is important. If a man wants to be taken seriously by a woman, then he has to visit the family of woman and introduce himself formally to the parents of the girl (Hofstede- Insights, 2018). This is why Indonesian subsidiary faced negative effects relating to HR policies and practices.
Masculinity suggests the preference of society for confidence, bravery, achievement and material reward for attaining success. On the contrary, femininity represents a preference for shyness, cooperation, quality of life and caring for the weak (Anastasia, 2015). In high scores men are tough and strong while women are kind and obedient. In low MAS scoring countries, the difference between the roles is not transparent as women also work in male- dominated profession (Hofstede- Insights, 2018).
According to the case study analysis, Indonesia scores 46 on this dimension and is considered low masculine. In Indonesian society, status and symbols are important but it is not always material gain that brings motivation. Sometimes the position which the person holds is more important because of Indonesian concept called ‘gengsi’ meaning external appearances. It is important to maintain gengsi aiming to impress and show a different appearance (Hofstede- Insights, 2018).
Long- term orientation describes the feeling of a society toward searching for quality. Short- term orientation relates to those societies that are strongly motivated towards the creation of the complete truth (Anastasia, 2015). This dimension analyses the ability of the group to adapt to changes or willingness to change. Cultures with long- term orientation are more open to accepting changes in their way of operating. Whereas short-term orientation means an unwillingness to let go of the traditional practices and accept new ones (Lobo, 2018).
Uncertainty Avoidance
According to the case study, Indonesia has a high score of 62 which indicates that it has a long-term orientation approach. In these societies, people believe that truth depends very much on situation, environment and time. They show an ability to adapt traditions easily to changed conditions, a strong tendency to save and invest, and determination in achieving results (Hofstede- Insights, 2018).
The dimension of indulgence vs. self- restraint focuses on happiness. A society that performs indulgence makes room for free satisfaction of natural and basic human ambitions relating to involving in fun and enjoying life (Anastasia, 2015). Start-up culture promotes indulgence over restraint as it keeps employees happy at work. Countries with high IVR score allow satisfaction of people emotions. In a society with low IVR, there is more emphasis on destroying satisfaction and more regulation of people behaviour (Mindtools, 2018).
According to the case, Indonesia has a low score of 38 which shows that it has a culture of restraint. This means they do not put emphasis on free time and control the satisfaction of their desires (Hofstede- Insights, 2018). This gives the negative effect on HR policies and practices followed in Indonesia.
Relating to the case study given, the HR policies and practices are giving negative effect in the Indonesian subsidiary. Hofstede six cultural dimensions were analysed in relation to the case, where Indonesia has high score in some dimension and low in other. Hence to solve the issues faces by the company, following steps could be taken:
- Company should establish the good system of information management to ensure the information about any big issue should come to decision level in appropriate terms.
- Attention must be paid to all information whether obtained from an informal way. It should be considered and analysed in all possible alternatives.
- A good organisational climate which encourages cooperation must be maintained.
- Becoming aware of the cultural preferences of a place for what they are and not assuming they represent the right way of doing job (Parrish, 2010).
Conclusion
Cultural differences do impact businesses occurring in cross-cultural situations. A lot of problems arise in matters of participation, communication and other relational areas. However, if business leaders or even the staff understands issues with respect to hofstede six cultural dimension, these problems can be analysed through a different view and necessary steps to solve these problems can be taken. The culture of the place of company should be analysed keeping in mind the factors which can affect it and accordingly the policies and practices must be designed. Thus, it is important to analyse the cross- cultural differences of different companies in order to make the business successful.
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