“Culture is important to HRM practices.” This statement may seem obvious, but its relevance may be lost in a country such as the United States, where many of the best-known theories of management practice are firmly rooted in Western culture. Geert Hofstede, a Dutch professor, has spent the better part of his professional life studying the similarities and differences among cultures. He has concluded that there are five major dimensions to culture:

1. Power distance Extent to which individuals expect a hierarchical structure that emphasizes status differences between subordinates and superiors.

2. Individualism Degree to which a society values personal goals, autonomy, and privacy over group loyalty, commitment to group norms, involvement in collective activities, social cohesiveness, and intense socialization.

3. Uncertainty avoidance Extent to which a society places a high value on reducing risk and instability.

4. Masculinity/femininity Degree to which a society views assertive or “masculine” behavior as important to success and encourages rigidly stereotyped gender roles.

5. Long-term/short-term orientation Extent to which values are oriented toward the future (saving, persistence) as opposed to the past or present (respect for tradition, fulfilling social obligations).99

Although Hofstede’s research has been criticized for being based largely on the experiences of employees working for only one company (IBM) and for downplaying the importance of cultural differences within countries, other evidence suggests that the five dimensions are a fair summary of cultural differences.100 They provide clues regarding the general configuration of HRM strategies that are most likely to mesh with a particular culture’s values. Figure 17.5 outlines the characteristics of cultures ranking high or low on each of Hofstede’s dimensions, lists sample countries falling at each end of the spectrum, and summarizes the organizational features and HRM practices that work best at each end of the scale.

The information in Figure 17.5 has significant implications for international firms. As a general principle, the more an HRM practice contradicts the prevailing societal norms, the more likely it will fail. 101 For instance, Hofstede describes management by objectives (MBO) as “perhaps the single most popular management technique ‘made in the U.S.A.’”102 because it assumes (1) negotiation between the boss and employee, or a not-too-large power distance, (2) a willingness on the part of both parties to take risks, or weak uncertainty avoidance, and (3) both supervisors and subordinates seeing performance and its associated rewards as important. Because all three assumptions are prominent features of U.S. culture, MBO “fits” the United States. But in other countries—France, for example—MBO has generally run into problems because of cultural incompatibility:

The high power distance to which the French are accustomed from childhood ultimately has thwarted the successful utilization of MBO as a truly participative process. . . . The problem is not necessarily with MBO per se but the French managers . . . who are unaware that they are trying to exert control through the implementation of the objectives of MBO almost by fiat.103

The globalization of industry raises numerous equal employment opportunity (EEO) issues, only some of which the U.S. courts have addressed. This is not a well-developed area of employment law.104 However, the following principles seem clear:

• ▪ U.S. companies are prohibited from basing employment decisions on employee characteristics such as race, sex, and age. This prohibition applies to international assignments, with the single exception that companies are not required to violate a host nation law. Thus, if a nation prohibits women from working in a specific business context, a U.S. company doing business in that nation is free to offer the particular international assignment covered by this host country law only to men. However, most countries that openly discriminate against their own female citizens are quite flexible in dealing with U.S. companies’ female employees. Therefore, companies should not make exclusions automatically.

• ▪ Foreign-national employees of U.S. companies working in their own country or in some other foreign country are not covered by U.S. employment law. For instance, the U.S. Supreme Court ruled that a Saudi Arabian citizen working for an American oil company in Saudi Arabia could not sue his employer under Title VII.105

  Power Distance: Organizational Characteristics and Selected HR Practices
  Dominant Values	Sample Countries	Organizational Features	Reward Practices	Staffing/Appraisal Practices
  Power Distance
  High
  • Top-down communications • Class divisions seen as natural • Authoritarianism	• Malaysia • Philippines • Mexico	• Centralization and tall organizational structures • Traditional line of command	• Hierarchical compensation system • Difference in pay and benefits reflect job and status differences; large differential between higher- and lower-level jobs • Visible rewards that project power, such as a large office or company car	• Limited search methods in recruitment; emphasis on connections and “whom you know” • Few formal mechanisms of selection • Superior makes selection choice for his or her sphere of influence
  Low
  • Egalitarianism • Status based on achievement • Joint decision making	• The Netherlands • Australia • Switzerland	• Flatter organizational structures • Decentralized control • Great degree of worker involvement	• Egalitarian-based compensation systems • Small differences in pay and benefits between higher- and lower-level jobs • Participatory pay strategies (such as gainsharing) more prevalent	• Multiple search methods; extensive advertisement • Formalized selection methods “to give everyone a fair chance” • Superior constrained in making selection choices • Selection based on merit; loyalty to superiors deemphasized
  Individualism: Organizational Characteristics and Selected HR Practices
  Dominant Values	Sample Countries	Organizational Features	Reward Practices	Staffing/Appraisal Practices
  Individualism
  High
  • Personal accomplishment • Belief in individual control and responsibility • Belief in creating one’s own destiny	• United States • Great Britain • Canada	• Organizations not compelled to care for employees’ total well-being • Employees look after their own individual interests • Explicit systems of control necessary to ensure compliance and prevent wide deviation from organizational norms	• Performance-based pay • Individual achievement rewarded • External equity emphasized • Extrinsic rewards are important indicators of personal success • Attempts made to isolate individual contributions (i.e., who did what) • Emphasis on short- term objectives	• Emphasis on credentials and visible performance outcomes attributed to individual • High turnover; commitment to organization for career reasons • Performance rather than seniority as criterion for advancement
  Low
  • Team accomplishment • Sacrifice for others • Belief in group control and responsibility • Belief in the hand of fate	• Singapore • South Korea • Indonesia	• Organizations committed to high-level involvement in workers’ personal lives • Loyalty to the firm is critical • Normative, rather than formal, systems of control to ensure compliance	• Group-based performance is important criterion for rewards • Seniority-based pay utilized • Intrinsic rewards essential • Internal equity guides pay policies • Personal needs (such as number of children) affect pay received	• Value of credentials and visible performance outcomes depends on perceived contributions to team efforts • Low turnover; commitment to organization as “family” • Seniority plays an important role in personnel decisions • “Fitting in” with work group crucial: belief that interpersonal relations are important performance dimension
  Uncertainty Avoidance: Organizational Characteristics and Selected HR Practices
  Dominant Values	Sample Countries	Organizational Features	Reward Practices	Staffing/Appraisal Practices
  Uncertainty Avoidance
  High
  • Fear of random events and the unknown • High value placed on stability and routine • Low tolerance for ambiguity	• Greece • Portugal • Italy	• Mechanistic structures • Written rules and policies guide the firm • Organizations strive to be predictable	• Bureaucratic pay policies utilized • Compensation programs tend to be centralized • Fixed pay more important than variable pay	• Bureaucratic rules/procedures to govern hiring and promotion • Seniority an important factor in hiring and promotions • Government/union regulations limit employer discretion in recruitment, promotion, and terminations
  Low
  • Unexpected viewed as challenging and exciting • Stability and routine seen as boring • Ambiguity seen as providing opportunities	• Singapore • Denmark • Sweden	• Less-structured activities • Fewer written rules to cope with changing environmental forces • Managers are more adaptable and tend to make riskier decisions	• Variable pay a key component in pay programs • External equity emphasized • Decentralized pay program is the norm	• Fewer rules/procedures to govern hiring and promotions • Seniority deemphasized in personal decisions • Employer provided much latitude in recruitment, promotion, and terminations
  Masculinity/Femininity: Organizational Characteristics and Selected HR Practices
  Dominant Values	Sample Countries	Organizational Features	Reward Practices	Staffing/Appraisal Practices
  Masculinity
  High
  • Material possessions important • Men given higher power and status than women • Rigid gender stereotypes	• Mexico • Germany • United States	• Some occupations labeled as “male,” others as “female” • Fewer women in higher-level positions	• Differential pay policies that allow for gender inequities • Tradition an acceptable basis for pay decisions • “Male” traits rewarded in promotions and other personnel decisions	• De facto preferential treatment for men in hiring/promotion decisions into higher-level jobs (even if it is illegal) • “Glass ceiling” for women • Occupational segregation
  Low
  • Quality of life valued more than material gain • Men not believed to be inherently superior • Minimal gender stereotyping	• The Netherlands • Norway • Sweden • Finland	• More flexibility in career choice for men and women • More women in higher-level jobs	• Jobs evaluated without regard for gender of job holders • Focus on work content rather than tradition to assess value of different jobs • Well-developed “equity goals” for pay determination	• Gender deemphasized in hiring/promotion decisions for any job • More women in upper-level positions • Occupational integration between the sexes
  Long-Term/Short-Term Orientation: Organizational Characteristics and Selected HR Practices
  Dominant Values	Sample Countries	Organizational Features	Reward Practices	Staffing/Appraisal Practices
  Long-Term/Short-Term Orientation
  High
  • Future-oriented • Delayed gratification • Long-term goals	• Japan • Hong Kong • China	• Stable organizations • Low employee turnover • Strong company culture	• Long-term rewards • Seniority as basis for pay • Managers rewarded for multiyear accomplishments • No expectation of frequent pay adjustments	• Slow promotions • Promotions from within • High employment security • High emphasis on saving employees’ face • High emphasis on coaching versus evaluation • High investment in training and employee development
  Low
  • Past- or present-oriented • Immediate gratification • Short-term goals	• United States • Indonesia	• Changing organization • High employee turnover • Weak company culture	• Short-term rewards • Recent performance as a basis for pay • Managers rewarded for annual accomplishments • High expectation of frequent pay adjustments	• Fast promotions • Internal and external hires • Low employment security • Low emphasis on saving employees’ face • High emphasis on evaluation versus coaching • Low investment in training and employee development

• ▪ Under the Immigration Control and Reform Act of 1986, people who are not U.S. citizens but who are living and have legal work status in the United States may not be discriminated against.

The effectiveness of an HRM practice depends on how well it matches a culture’s value system. Even so, managers need to keep several caveats in mind.

• ▪ “National culture” may be an elusive concept For this reason, managers should be careful not to be guided by stereotypes that hold some truth but may not apply to very many people in a culture. Stereotyping is a great danger in large, heterogeneous countries such as the United States, where cultural differences are often huge, but it can also cause problems even in relatively homogeneous nations. For instance, Western German firms hiring Eastern German workers frequently found that the latter reacted negatively to incentive systems that had been used successfully with their Western German counterparts—despite the fact that the two groups shared the same language, ethnicity, and cultural background. The Eastern Germans distrusted such incentive schemes, reported they felt manipulated by management, and shunned those workers who outproduced others.106 A recent study examining Hofstede’s culture dimensions suggests that some cultures are tighter than others, meaning that they exert more pressure on people to conform. Hence, individuals in culturally tighter societies have much less flexibility to diverge from cultural norms.107

• ▪ Cultures change over time Although cultures are generally resistant to change, sometimes the pace of change quickens; hence, employee values and attitudes may differ significantly from one time period to another. This is particularly true when there is rapid economic development and when countries are exposed to foreign influences (see Exhibit 17.1).

• ▪ Corporate headquarters sometimes blame international personnel problems on cultural factors without careful study Often personnel problems have little to do with cultural values and much to do with poor management. For example, a U.S. company introduced individual incentives for R&D employees at its English subsidiary. This policy created intense conflict, lack of cooperation, and declining performance. Top managers blamed the strong role of labor unions in England for these disappointing results. In fact, a large amount of evidence indicates that individual-based incentives are counterproductive when the nature of the task requires extensive teamwork (as is the case in R&D).108

• ▪ Hard data on the success or failure of different HRM practices as a function of national culture are practically nonexistent This means that judgment calls, gut feelings, and some trial and error based on a fine-tuned cultural sensitivity and open-mindedness are mandatory in international HRM.

• ▪ Different cultures often have very different notions of right and wrong In many cases, corporate headquarters may have to impose its own value system across multiple nations with conflicting value structures. For example, child labor is common in many Asian and African countries. The corporation may choose to avoid such practices on ethical grounds, but it must recognize that doing so can put it at a competitive disadvantage because local firms that have no qualms about using child labor will have lower labor costs. And, although members of the World Trade Organization and the United Nations have agreed to a set of “core labor standards” prohibiting employment discrimination, exploitive forms of child labor, and the use of forced labor such as prison labor, violations still occur in many countries, with at least 13 million children working in export industries, such as textiles.109

• ▪ The business laws of other countries often force companies to change their practices In some cases, if the firm wants to do business in another country, it must accept local regulations and practices even if these differ significantly from those in the home country.110

• ▪ Multinationals must find the right balance between tailor-made HR policies to fit particular cultures and the need to integrate global consistency with local adaptability The current trend in establishing international HR policies appears to be to strive toward integration rather than segmentation of HR policies. The reason for this trend toward integration, according to a recent survey, is that 85 percent of global companies are trying to establish a corporate culture in all locations consistent with the organization’s goals and vision. However, 88 percent report that local culture and customs have a “moderate to great” influence on the way they conduct business in particular locations.111 This requires that organizations try to balance the need for local adaptation with the trend toward global consistency of HR policies.

Although the discussion in this chapter has focused mainly on differences in HRM practices across different countries, global forces are exerting a great deal of influence to make them more similar. Financial investors and the stock market in general appear to favor certain organizational practices (such as pay for performance, promotion based on merit, and restructuring), regardless of nationality, and firms all over the world appear to be responding accordingly, as we see in Exhibit 17.1.