Creating Culturally Competent Firms: A DecisionMaking Perspective

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Creating Culturally Competent Firms A
Decision-Making Perspective

• Max Boisot
• Birmingham Business School

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Culture

• Culture describes the way that that groups of
  different size structure and share information
• Every durable group sooner or later develops a
  culture
• Individuals operate within multiple cultures

Ref. 1.1.1.3
? Max Boisot 1999
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The I-Space The Key Concept
Codified
Abstract Symbolic
Structuring Knowledge
Narrative
Experiential
Ref. 1.1.2.1 ? Max Boisot
Uncodified
Sharing Knowledge
Diffused
Undiffused
4
Institutions and Cultures in the I-Space
Markets
Codified
Bureaucracies
Clans
Fiefs
Uncodified
Diffused
Undiffused
? Max Boisot 1999
Ref.1.1.1.3
5
National Cultures in the I-Space
Codified
US ( Markets)
France (Bureaucracies)
Japan (Clans)
China (Fiefs)
Uncodified
Diffused
Undiffused
? Max Boisot 1999
Ref.1.1.1.5
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Corporate Culture in the I-Space
Codified
Nike (Markets)
IBM (Bureaucracies)
McKinsey (Clans)
Apple (Fiefs)
Uncodified
Diffused
Undiffused
? Max Boisot 1999
Ref. 1.1.1.4
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Corporate versus national culture in the I-Space
Codified
Bureaucracies (The Corporate Culture)
Clans (The Host Culture)
Uncodified
Diffused
Undiffused
Ref. 1.1.1.5
? Max Boisot 1999
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Organizational Evolution in The I-Space
Codified
The Multidivisional Firm (Markets)
The Functional Firm (Bureaucracies)
The Networked Enterprise (Clans)
Start-ups (Fiefs)
Uncodified
Diffused
Undiffused
Ref. 1.1.2.3
? Max Boisot 1999
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Multiple Cultures Inside the Firm
Fiefs
Clans
Bureaucracies
Ref. 1.1.1.4 ? Max Boisot
Markets
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The Task Basis of Corporate Culture
Clan
Market
Bureaucracy
Fief
Clan
Fief
Ref. 1.1.1.4 ? Max Boisot
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Culture and Decision-Making
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Markets

• Information diffusion favours the
  decentralization of decisions
• The relevant information is codified and
  diffused
• Relationships are horizontal and impersonal
• No barriers to entry and exit everyone can play
• A zero-sum world between competitors
• The rules of the game are stable even if the
  plays and players are not

Markets
Bureaucracies
Clans
Fiefs
Examples Financial markets, most commodity
markets, some markets for casual labour
? Max Boisot 1999
Ref. 1.1.1.3
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Bureaucracies

• Controls on the diffusion of information favours
  either centralization or the controlled
  delegation of decisions.
• Information is codified but undiffused
• Relationship are hierarchical and impersonal
• Barriers to entry in the decision arena are based
  on the possession of the appropriate codified
  knowledge
• Decisions based on hard rather than soft data
  the importance of soft contextual data is
  underplayed
• Both the rules of the game as well as plays and
  players are stable

Markets
Codified
Bureaucracies
Clans
Fiefs
Uncodified
Undiffused
Diffused
Examples government agencies, the military, the
large corporation
? Max Boisot 1999
Ref. 1.1.1.3
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Clans

• Decisions are the result of bargaining and
  negotiation between a limited number of players.
• Information uncodified and diffusion is limited
• Relationship are horizontal and personal
• In-groups tend to solve their problem at the
  expense of out-groups
• Barriers to entry based on the possession of
  appropriate uncodified knowledge ie, a
  knowledge and appreciation of context
• The players tend to be stable but the rules of
  the game and the plays are not

Markets
Bureaucracies
Clans
Fiefs
Examples Cartels, Kereitsu, top management teams
? Max Boisot 1999
Ref. 1.1.1.3
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Fiefs

• The lack of structure favours intuitive
  decision-making by a charismatic leader
• Information uncodified and undiffused
• Relationship are hierarchical and personal
• Barriers to entry based on the possession of
  unique uncodified knowledge ie, personal
  experience
• Neither the rules of the game, the players nor
  the plays are stable
• Since mastery of contextual knowledge is
  everything, neither delegation nor
  decentralization is easy.

Markets
Bureaucracies
Clans
Fiefs
Examples family businesses, some entrepreneurial
start-ups, the top tier of some bureaucracies
? Max Boisot 1999
Ref. 1.1.1.3
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Conclusion

• The rational decision-making model ignores the
  information environment in which decisions are
  made
• That information environment shapes both cultural
  preferences and constraints upstream of
  decision-making.
• Only an expanded view of decision-making would
  allow us to develop a culturally competent firm.

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Discussion Questions

• Do all decisions have a cultural dimension?
• Could the dynamics of globalization eliminate the
  need for cultural competence?
• How would the culturally competent firm modify
  its decision-making procedures in practice?