COMPARATIVE MANAGEMENT

What is it about? Comparative Management

Focuses on the similarities and differences among business and management systems from different contexts.

Intercultural management
Intercultural management is the combination of knowledge, insights and skills which are necessary for adequately dealing with national and regional cultures and differences between cultures, at the several management levels within and between organisations. (W. Burggraaf)
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COMPARATIVE/INTERCULTURAL MANAGEMENT

Why is it important?

GLOBALIZATION
We live in a globalized world Development of international business Economies of scale, market share Drive for globalization Sales, production, R&D,
Increasing need for international contacts Management has to be international
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But
Sales, Marketing Need to cater for local tastes CUSTOMERS

Operations in foreign countries Need to manage taking due account of national cultures COWORKERS

BE GLOCAL!
Think globally, act locally 4

Diverse cultures, multiculturalism Multicultural teams Cross-border Mergers and Acquisitions International careers, Cultural adjustment Large multinational corporations

MANAGEMENT THEORIES
Are Management theories Universal (culture-free) ? Culture-bound? Do cultural differences matter?

NEED TO CONSIDER DIFFERENCES IN AREAS AND FUNCTIONS OF MANAGEMENT and in some key aspects which are central to the process of managing business, such as: Centralised vs. Decentralised decision making.
There is variation across national culture in the extent to which important organisational decisions are made by senior managers, or whether decisions are made down the line with authority devolved. Safety vs. risk. In some cultures, managers have a very low tolerance of uncertainty and manage in ways to control this. In others, there is a much greater tolerance of uncertainty and much greater risk-taking.
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Individual

vs.

group

rewards.

In some cultures, there is emphasis on rewarding individual achievement. In other cultures the emphasis is on rewarding the group collectively.

Informal

vs.

formal

procedures.

In some cultures, there is considerable use of informal procedures. In others, formal procedures are very important.

High

vs.

low

organisational

loyalty.

In some cultures, people identify less with their organisation or employer and more with their occupational group or profession.

Co-operation

vs.

competition.

Some cultures emphasise co-operation in the organisation, others foster competition.

Hodgetts R& Luthans R, 1997 8

Areas of research and types of results

Ad-hoc, specific Country Clusters (cultural distance) Culture Dimensions Country Profiles Stereotypes, Cultural standards How to communicate, Marketing, How to negotiate Dos and donts

Know-how related to the different management functions (Leading, Planning...) International careers and international placements Expatriate managers Culture shock Adaptation
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Country clusters

Source: S. Ronen and 0. Shenkar. "Clustering Countries on Attitudinal Dimensions: A Review 10 and Synthesis." Academy of Management Review, 1985

THE PREJUDICE MAP

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Three rough categories of world's cultures

Linear-actives - those who plan, schedule, organise, pursue action chains, do one thing at a time. Germans and Swiss are in this group. Multi-actives - those lively, loquacious peoples who do many things at once, planning their priorities not according to a time schedule, but according to the relative thrill or importance that each appointment brings with it. Italians, Latin Americans and Arabs are members of this group. Reactives - those cultures that prioritise courtesy and respect, listening quietly and calmly to their interlocutors and reacting carefully to the other side's proposals. Chinese, Japanese and Finns are in this group.
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When Cultures Collide Richard Lewis

APPROACHES TO COMPARATIVE MANAGEMENT Socio-economic nature Behavioural/psychological nature

Behavioural Economic development Environmental (ecological) Open system perspective Culture Ghiselli and Porter Harbison and Myers Farmer/Richman Negandhi Hofstede

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DEVELOPMENT OF COMPARATIVE MANAGEMENT

"A vital question for international business seems to be to what extent can American principles, practices and general know-how be transferred effectively to other countries, at what cost, and to what degree and extent is the overall process and effectiveness of management constrained by cultural variables?"
RICHMAN, B. (1965: 294), Significance of cultural variables Academy of Management Journal 8, pp. 292-308

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Europe VS North America

Past - future Wisdom - vitality Stability - mobility Convention - informality Necessity - abundance Quality - quantity Diversity - organization
NOWOTNY, O. (1964: 101), American vs European management philosophy,

15 Harvard Business Review 42, May-Apr, pp. 101-108

Great Writers on Organizations

From the list of great authors of the XX century in the area of organization theory and management that Pugh included in his book Great Writers on Organizations from the 1964 (1st edition) to the present (1997), the large majority is made of North Americans (50)... followed by the British (15) and... other nationalities (7). And from those only two deal in a systematic way with the effects of culture on management (Hofstede and Ouchi).
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Books that made management

Stuart Crainer (2000) in his selection of the 75 books that made management chooses 53 North Americans, 8 British and just 14 from other nationalities and this including authors as von Clausewitz, Machiavelli and Sun Tzu as authors of books that made management!
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Main results of comparative management research (up to the 70s) 1. There is no one way of doing things. The principle of equifinality applies to the functioning of social organizations; managers may achieve given objectives through various methods.

Negandhi, A.(1975), Comparative management and organization theory: a marriage needed Academy of Management Journal 18, pp. 334-344

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1. There is no universal applicability of either authoritarian or participating-democratic management styles. In general the United States can best be characterized as following democratic-participative style, while Germany, France, and most of the developing countries are authoritarian in their management style. The authoritarian style is not necessarily dysfunctional in developing countries. This perhaps may be the "right type" of leadership.
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1. More objective measures are brought to bear in making managerial decisions with respect to compensation, objectives, goal setting, etc., in the developed countries; subjective judgement (emotions, religious beliefs) often enters the decision making processes in the developing countries.

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1. There are similarities and differences among the managers around the world. Similarities are explained in terms of industrialization or the industrial subculture. Differences are explained in terms of cultural variables. The cultural factors are considered the most important influencing variables.

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TYPES OF CROSS-CULTURAL MANAGEMENT RESEARCH

Parochial Research Ethnocentric Research Polycentric Research Comparative Research Geocentric Studies Synergistic Studies
Nancy Adler

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TYPES OF CROSS-CULTURAL MANAGEMENT RESEARCH

TYPE Parochial Research Ethnocentric Research Polycentric Research Comparative Research Geocentric Studies Synergistic Studies CULTURE Single culture studies Second culture studies Studies in many cultures Studies contrasting many cultures International business studies Intercultural management studies
APPROACH TO SIMILARITY & DIFFERENCE APPROACH TO UNIVERSALITY Assumed universality TYPE OF STUDY

Assumed similarity Search for similarity Search for difference Search for both similarity and difference Search for similarity Use of similarities and differences as a resource

Domestic studies Replication studies Individual studies of foreign cultures Studies comparing many foreign cultures Studies of multinational organizations Studies of intercultural interaction within work 23 settings

Questioned universality Denied universality

Emergent universality

Extended universality

Created universality

Comparative management construct: Negandhi and Prasad model

Management Philosophy
Management attitudes toward: Employees Consumers Suppliers Stockholders Government Community

Affe ct

Management Effectiveness Management Practices

Affe ct

Planning, Organizing, Staffing, Motivation and Directing, Controlling

Environmental Factors
Socioeconomic Educational Political Legal and Cultural

Enterprise Effectiveness
Affe ct

Source: A. R. Negandhi and S. B. Prasad. Comparative Management New York: Appleton Century-Crofts, 1971, p. 23.

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Comparative Management Research Strategy, Negandhi

The Industrial Firm Socio-economic, Political, Legal, and Cultural Environments (E) E1 Management Philosophy Management Process Management Effectiveness

(X)

(P)

(Z)

U.S. FIRM IN U.S.A.

X1

P1
DIFFERENCE DUE TO CHANGE FROM E1 TO E2

Z1

U.S. FIRM IN INDIA

E2

X1

P2

Z2

DIFFERENCE DUE TO CHANGE FROM X1 TO X2 INDIAN DOMESTIC FIRM

E2

X2

P3

Z3

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Source: A model for analyzing organizations in cross-cultural settings: a conceptual scheme and some research findings, p. 291, in Negandhi (1973), Modern Organization T heory, Kent State Un. P ress, Kent.

ELEMENTS OF MANAGEMENT PRACTICES AND EFFECTIVENESS US SUBSIDIARY VERSUS LOCAL FIRM

1. Recruitment of potential managers

NEGANDHI, A. (1979)

Formally and systematically done. Open-minded on all potential sources for managerial personnel Done on ad hoc basis. Restricted to small group of family members or relatives and friends

2. Recruitment of middle and senior managers firm Formally and systematically done. Provided opportunity for advancement within the firm Done on ad hoc basis. No systematic attempt at providing opportunity for advancement within the

3. Management education Formally done. Regularly used outside training courses for personnel Done on irregular or ad hoc basis

4. Attitudes toward management development Visualized as necessary element in company's growth and survival Considered as unnecessary expense 26

5. Treatment of existing management Continuous evaluation. Ready to demote or fire second-rate and promote young and qualified

6. Delegation by senior management Delegate authority to subordinates Unwilling to delegate authority

7. Management structure Decentralized: individual positions are well defined and specified. Organization charts and manuals used. Centralized: individual positions are not well defined; authority line diffused. Organization charts not widely used. 8. Management communication Free flow of communication encouraged and demanded A great deal of secrecy and hoarding of information at all levels

9. Use of management consultants Used frequently Not used

10. Interfirm comparison at home and overseas Done on regular basis Not done at all or done on ad hoc basis
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11. Market share Constant awareness of market share Not much concern

12. Objective of firm Growth and profits Profits

13. Assessment of performance Measured in terms of growth, long term potential human resources, profits, assets, and sales Measured in terms of short-term profits

14. Diversification Considered as desired objectives Undertaken as necessary evil

15. Future of firm Evaluated on long-term basis Evaluated on short-term or medium-term basis
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16. Long-range planning Five- or ten-year horizons. Systematic and formalized One- or two-year horizons. Done on an ad hoc basis

17. Use of budgetary control Used with considerable emphasis on its importance to the firm Done haphazardly with less emphasis on its importance for the firm

18. Review of operations Regularly undertaken with feedback mechanism well developed Done on ad hoc basis with no feed back mechanism

19. Capital budgeting Regularly done Done on ad hoc basis or not done at all

20. Relationship of sales to production Production facilities are planned on creating greater demands for the goods Production is based on serving short-supply market conditions (seller's market)
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21. Advertising and public relations Seen as useful in creating public image of the company Used only as a necessary evil

22. Capacity, efficiency and productivity Assessed on regular basis No regular assessment

23. Plant capacity Utilized at the fullest possible level; regular maintenance Utilized as seems appropriate by top man without objective assessment. Irregular maintenance

24. Buying function Conceived as managerial function Conceived as clerical function

25. Suppliers Conceived as partners in progress Conceived as a necessary evil

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26. Operational research techniques Uses various techniques to optimize plant capacity Regards various techniques as status symbols rather than optimizing techniques

27. Creation of positive labour relations Conceived as management responsibility Conceived as government /labour union responsibility

28. Assessment of good labour relations Done on regular and systematic basis Done on ad hoc basis

29. Grievance procedure Carefully worked out, agreed by all parties and adhered to Roughly drawn up and not always followed

30. Unions Conceived as having constructive role to play Conceived as nuisance

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31. Worker' output Belief that employees will give their best when treated as being responsible Belief that employees are lazy

32. Personnel function Conceived as top priority Conceived as clerical chaos

33. Training and education of workforce Conceived as necessary element of organizational activities; variety of training Conceived as necessary evil. Mostly on-the-job training for the blue-collar employee

34. Shortage of skilled labour and/or other labour Not taken for granted. Action to train up semi-skilled and unskilled personnel Acceptance of shortage of skilled employees as limiting factor

35. Method of payment Based on objective criteria. Attempts to pay higher than market rate Based on what they can get by with the minimum
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36. Employees Conceived as resource Conceived as a necessary evil

37. Relationship of research department to production Close co-operation between two units Research department usually nonexistent, or if it exists operates as separate unit

38. Problems of firm Conceived as an opportunity to undertake cost-efficiency Conceived as fault of others - government, labour union,, competition

39. Unprofitable products Ready to drop unless found useful for the long-range growth Unable to find out in the first place

40. Competition Conceived as healthy and necessary Conceived as unfair and destructive
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US SUBSIDIARY VERSUS LOCAL FIRM (Negandhi, 1979)

1. Recruitment of potential managers Formally and systematically done. Open-minded on all potential sources for managerial personnel Done on ad hoc basis. Restricted to small group of family members or relatives and friends ....... 9. Use of management consultants Used frequently Not used
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Abbas(1988)

Arab Stereotype

American Stereotype

Recruitment of Personnel

Highly subjective, selection depends Relatively objective, standard developed, on personal contacts, nepotism, merit and experience are considered. regionalism, and family name.

Use of Management Consultants

A sign of something is going wrong, Highly regarded and used frequently. used only in crisis situation.

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Comparative Management: Farmer and Richman Model

Affect

External Constraints
Educational Sociological Legal-political Economic

Elements of the Management Process

Affect
Planning Organizing Staf f ing Directing Controlling Policy making operating areas

Affect

Management and Managerial Effectiveness

Determine

Firm Eficiency

Determine

System Efficiency

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Source: Farmer, R. and Richman, B., Comparative Management and Economic P rogress Irwin, 1965, p. 35

CRITICAL ENVIRONMENTAL CONSTRAINTS

(Farmer e Richman)

C1: EDUCATIONAL-CULTURAL VARIABLES C2: SOCIOLOGICAL-CULTURAL VARIABLES C3: POLITICAL AND LEGAL VARIABLES C4: ECONOMIC VARIABLES

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C1: EDUCATIONAL-CULTURAL VARIABLES

C11: Literacy level C12: Specialized vocational and technical training and general secondary education C13: Higher education C14: Special management development programs C15: Attitude toward education C16: Educational match with requirements
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C2: SOCIOLOGICAL-CULTURAL VARIABLES

C21: Attitude toward industrial managers and management C22: View of authority and subordinates. C23: Inter-organizational cooperation C24: Attitude toward achievement and work C25: Class structure and individual mobility C26: Attitude toward wealth and material gain C27: Attitude toward scientific method C28: Attitude toward risk taking C29: Attitude toward change
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C3: POLITICAL AND LEGAL VARIABLES

C31: Relevant legal rules of the game C32: Defense and military policy C33: Foreign policy C34: Political stability C35: Political organization C36: Flexibility of law and legal changes

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C31: Relevant legal rules of the game:

Quality, efficiency, and effectiveness of the legal structure in terms of general business law, labour law, tax law, and general law relevant to business, degree of enforcement, reliability, and so on.

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C4: ECONOMIC VARIABLES

C41: General economic framework C42: Central banking system and monetary policy C43: Fiscal policy C44: Economic stability C45: Organization of capital markets C46: Factor endowment C47: Market size C48: Social overhead capital and external economies
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