Take off your shoes and ask for slippers: Integrating corporate culture in global business

June 07, 2006

"Olive trees are important. They represent everything that roots us, anchors us, identifies us and locates us in this world -- whether it be belonging to a family, a community, a tribe, a nation, a religion or, most of all, a place called home," writes Thomas Friedman in "The Lexus and the Olive Tree." Friedman describes the conflict between the Lexus -- "dedicated to modernizing, streamlining and privatizing their economies in order to thrive in a system of globalization" -- and the olive tree -- dedicated to our unique cultural traditions, histories, countries, towns, and families.


As globalization moves into ever more culturally diverse locations, the question of business and culture -- the Lexus and the olive tree -- becomes increasingly germane. For Western businesses that want to operate in culturally-different countries, how do they maintain their own management practices while achieving success away from home?


The answer is integration. "It's like being a guest in the home of a person who always takes off his shoes. You may not feel comfortable walking around in your bare feet, but simply keeping your shoes on -- disrespecting the other's culture -- is not an effective solution," observes W. P. Carey Management Professor Anne Tsui. "So maybe you ask for a pair of slippers, which would be localizing your practices with the culture of your host. By respecting others' cultures we can integrate with them, without completely losing our own preferred way of doing things."



In a soon-to-be-published book chapter, "An Organizational Perspective on Multi-level Cultural Integration: Human Resource Management Practices in Cross-Cultural Contexts," Tsui and her coauthor Xiao-Ping Chen, a professor of management at the University of Washington, suggest that a decision point arises when local cultural practices are inconsistent with the company's practices. Tsui and Chen demonstrate that companies can choose to make successful decisions by compromising on both sides -- and introducing a bit of creative thinking.


The authors use the example of Starbucks, a company with core values that include teamwork, equal participation, and diversity. When looking to expand into South Korea, Starbucks realized that the country's culture valued power distance -- hierarchical relationships not conducive to equality or teamwork. "The company had to decide if it should change its organizational structure to be more hierarchical to 'fit' South Korea's national culture, or remain the same to maintain its core values," write Tsui and Chen.


What the company found was that its decision didn't have to be quite so black-and-white. Instead of compromising its own company culture -- or risking failure by attempting to impose that culture on South Korean employees -- Starbucks developed creative ways to remain true to its core company values and help South Korean employees and customers feel culturally comfortable.


One potential point of cultural conflict was Starbucks' practice of employees -- referred to as 'partners' rather than by traditional hierarchical titles -- calling each other by first name; this practice generated a high level of discomfort among the South Korean employees. "To solve this conflict, Starbucks came up with a solution -- managers give every Korean employee an English name so that they can call each other by their English names and everyone feels comfortable [the English name is a substitute for the title with the last name] and, at the same time, the organization's cultural value of equality between employees is retained," write Tsui and Chen.


Another potential point of cultural conflict was Starbuck's value of teamwork which, in practice, means that each employee does whatever needs to be done in the store. This posed a problem because Korean men traditionally do not do housework-type chores (including cleaning toilets and washing dishes), work that everyone is required to help with in Starbucks' stores where teamwork and equality are emphasized.


"To help the Korean male employees overcome the psychological barrier and to help with washing the dishes and restrooms, Starbucks adopted the role-modeling approach that is effective in high power distance cultures," write Tsui and Chen. "Lower-level employees accept the directives, including imitating the behaviors, of top leaders. Starbucks had the international director for the company's headquarters do all these activities and even hung a picture of him cleaning the toilet!"


In essence, Starbucks used one unique aspect of Korea's culture -- the affinity for imitating behavior of leaders -- to help employees do the tasks that were culturally uncomfortable at first, but are an important part of the company's core values.


Integration of company culture with a country's social culture is one technique that has proven effective for global companies. Another technique is integrating company culture with individual employee values. That technique is one that W. P. Carey Management Professor Luis Gomez-Mejia advocates. "In any culture, you can find the people you want, the kinds of human capital you want to fit your business needs," Gomez-Mejia says.


To illustrate that approach, Tsui and Chen describe Swedish company IKEA's entrance into the U.S. market. IKEA, they say, values equality even more than the average U.S. company. IKEA does not give employees job titles or clear job descriptions. "When IKEA opened its first store in Seattle, many recruits quit after a few months because there was a large gap between IKEA's values and the typical cultural orientations and expectations of U.S. employees," Tsui and Chen explain.


That problem -- a high turnover rate -- led the company to rethink its recruiting strategy. "Instead of recruiting the best qualified people in the market, the recruiters deliberately emphasized IKEA's values and provided realistic job previews and let those who did not identify with the IKEA values self-select out of the company. Due to the large variability in individual values within the U.S., IKEA was able to recruit enough people who could identify with its values," say Tsui and Chen. The result: low turnover rates and a number of successful stores across the U.S.



The effect of integration on cultural differences


What effect will integration have on cultural differences?  Will the world in the next decades be one in which Western business practices, integrated into local cultures, filter through to other levels of society, eventually creating one homogenized global culture?


Tsui says no. "Work is an important area of influence," she said, "but I don't think it's likely that changes in workplace cultures will filter through to other areas of people's lives." Tsui does admit that the current generation of Chinese young people has values that differ from their parents, though she does not attribute that change to changes in workplace cultures.


"Younger people in China are more individualistic, which is a traditionally Western cultural value," Tsui said. Exposure to Western-centric TV programming is a far more likely determinant of cultural value changes in China, she suggested. "A person's values are formed from birth through college," Tsui said, "long before they enter the workplace."



The role of research in business-culture integration


So how does a company like Starbucks learn about the aspects of a country's culture in order to plan a successful integration?  W. P. Carey Economics Professor Joe Brada, who heads the school's study abroad program, says that an entire cottage industry has developed to help businesses learn how to successfully operate in culturally different locations. There are also management journals, educational institutions, professional conferences.


But whatever method a business uses to get information about local cultures, that information comes from one source: research.


The problem, said Tsui and Gomez-Mejia, is that research about culturally different developing countries is not very complete. According to Tsui, 90 percent or more of all management research is based on American and Western European companies. And it's only been in the last twenty years that good business schools have emerged in countries beside the U.S., said Gomez-Mejia.


Tsui said that we need to know more about management in other countries -- like Asia, Eastern Europe, and Latin America -- to facilitate more successful business ventures and to elevate the standard of global business practices through better management. Research affects business practices by appearing in magazines, journals, and textbooks -- which then are read by business leaders and future leaders who are currently students.


Tsui is a leader in the effort to build a body of management research in and about China. She founded the International Association for Chinese Management Research as well as the journal Management and Organization Review.


Research in management practices lags in China, Tsui said, for two reasons: First, businesses have developed so quickly there, making it difficult for research and theory to keep pace. Second, China's cultural revolution effectively shut down universities for 10 years in China -- a long time considering that China's modern business development only begun in earnest in the 1980s.


Gomez-Mejia has played a similar role on the other side of the world. He is president and founder of the Iberoamerican Academy of Management, an affiliate of the Academy of Management, which has become the catalyst for creating a community of management scholars among faculty and students at business schools in Spain, Portugal, Latin America and South America. 



The outlook for businesses


Gomez-Mejia says it is because companies have done so well at integrating with local cultures that globalization -- our increasing interconnectedness -- has grown so rapidly. "Companies have done amazingly well in the last 10 years," Gomez-Mejia said, adding, "They've been quite adaptable and have learned what it takes to overcome cultural barriers and difficulties."


Brada's advice for business is to learn what the location's culture is and how that culture will influence what you're trying to do. "First, consider feasibility. Ask yourself: Given our company culture, is this a location where we can function effectively?  Second, think about what you need to know in terms of managing employees. Ask yourself: What are typical manager-employee relations?"


With a great percentage of the world's work force -- and consumer base -- in developing countries that are culturally quite different from countries in North America and Western Europe, any business that wishes to be global will have to pay attention to those cultural differences.


Whether a company chooses to integrate its own culture with local cultures or seek out individuals who fit within the company's culture, two points are clear: The global company will have to face cultural differences, and the more management research is done in developing countries, the more successful companies operating there will be.


While research catches up with business development, businesses would do well to remember Tsui's suggestion: "Successful companies are respectful guests."



Bottom line:


  • Forcing corporate culture on employees in culturally different locations may not be the most effective way to manage globally. 
  • One way companies can effectively manage in culturally different locations is by integrating corporate culture with local culture. Another way is by seeking out individual employees who fit well within the company culture. 
  • Management practices derived from U.S.-centric research may not be appropriate for companies in culturally different locations. 
  • More country-specific research will have to be done to offer a better understanding of the best management practices for companies in culturally different locations.