BA105: Organizational Behavior

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BA105 Organizational Behavior

• Professor Jim Lincoln
• Managing globally

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GLOBAL MANAGEMENT

• Is it different from the "management of
  diversity?
• The issues and stakes are similar
• Serving a diverse international market
• Realizing the potential of people in a globally
  diverse workforce
• Leveraging global diversity to increase
  efficiency, flexibility, creativity, and
  ultimately bottom-line performance

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But the challenge is greater

• In addition to cultural, ethnic, and racial
  diversity
• language, values, norms, ethics, habits, customs,
  traditions, beliefs, interpersonal styles,
  etiquette
• There are institutional differences to deal with
• Education levels and systems, legal and court
  systems, business practices and ethics,
  regulatory systems, status systems, social
  networks, unions, labor markets and employment
  systems, welfare systems

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Managing language culture diversity

• Be multilingual! If monolingual, speak clear
  English!
• Read the culture grasp preferences, tastes,
  habits
• Learn interpersonal norms (e.g., etiquette) Avoid
  faux pas
• Should you be yourself or try to fit in?

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Global marketing fiascos that an ounce of
cultural savvy might have prevented

• Nothing sucks like an Electrolux
• Fords marketing of the Pinto (translates as
  small male genitalia) in Brazil
• Fords marketing of the European-made Ka
  (translates as mosquito) in Japan.
• GMs marketing of the Chevy Nova (translates as
  no go in Spanish) in California and Latin
  America
• Coca-cola rendered phonetically in Chinese
  translated as bite the wax tadpole
• Come alive with the Pepsi generation translated
  in Chinese as Pepsi will bring your ancestors
  back from the dead
• PGs marketing of diapers and all-temperature
  detergent in Japan

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Fedex in Europe

• The open door policy maintained in the U. S. by
  FEDEX is still not widely used abroad. In the
  U. S., the company has.. a casual atmosphere
  employees are on a first-name basis, and
  executives .. mingle with employees and solicit
  their opinions and suggestions. Managers and
  workers in European and Asian countries are often
  uncomfortable with this type and level of
  formality.
• To illustrate, when Charles Thomson visited a
  newly acquired company in Brussels, he behaved as
  he would in the U. S. He arrived early took, off
  his coat, walked around the facility, and chatted
  with employees. Later, Thomson discovered that
  his behavior had damaged his image among managers
  in Brussels he had spoken to employees who were
  not his direct reports and without their managers
  being present, and his casual manner and attire
  offended these managers.
• D. Lewin, D. Dralle, C. W. Thomson
  International HR at Federal Express (B). March,
  1992.

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Globally-varying management practices

• Strategic orientation
• Finance/marketing vs. engineering/manufacturing
• Profitability vs. growth
• Decision-making practices
• Consensus/participatory vs. top-down
• Leadership style
• Heroic vs. developmental
• Command-and-control vs. participation
• Organization design
• Grouping and linking strategy
• Formal and rigid vs. fuzzy and flexible
• Corporate governance
• Stakeholder vs. stockholder capitalism
• Insider vs. outsider boards

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HR systems and labor markets

• Recruitment practices
• Midcareer vs. new grads
• Retention and dismissal
• Constraints on leaving and firing
• Performance appraisal
• Direct vs. indirect
• Compensation
• Basis seniority, skill, performance
• Norms of equity inequality
• Working hours and overtime
• Promotion, rotation and transfer
• Discrimination/diversity

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Legal systems

• Labor law (e.g., codetermination)
• Contract law
• Antitrust law and enforcement
• Intellectual property law
• Accounting rules
• Taxation
• Equal employment regulations
• Protectionist regulation
• Local content rules
• Protected/subsidized sectors (e.g., small firms
  agriculture)
• Licensing/inspection

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Capital markets

• Equity, bank corporate debt
• Market size, efficiency, sensitivity
• Institutional vs. individual investors
• Market for corporate control (M A)
• Venture capital IPOs

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Supply chain organization

• Cozy and exclusive or arms-length open?
• Complexity/middlemen/layering/scale

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Networking is the key to doing business in most
of the world

• many Germans are admitting that they have liked
  their business relationships cozy. If a supplier
  wanted to remodel a customers house for a low
  price or shower a key contact with gifts, no one
  would make a fuss about it. There is an inbred
  nature to the Germany economy, says David
  Herman, the American chief of Opel. The
  American style is more puritanical, says
  management consultant Gertrud Hoehler. ..Calls
  for reform are on the rise. Auditors are
  complaining they have no mandate to look for
  improper expendituresGermans suddenly are
  embarrassed that their tax code actually allows
  deductions for bribes.
• Business Week, 8/7/1995.

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Cultural obstacles to British entrepreneurial
success

• Imagine you're a high-tech entrepreneur
  desperate for funds. Riding in an elevator with a
  prospective investor, you have just 30 seconds to
  persuade him to risk his money on your start-up.
  If you're British, you might make a modest, even
  apologetic, presentation and expect your idea to
  sell itself. It won't.
• International venture capitalists tried Monday
  to teach British entrepreneurs some proven
  American tricks for winning over financial
  backers. Distilled to its essence, their advice
  was simple Brag.
• Participants at a conference on high-tech
  business said British entrepreneurs need to ditch
  their customary reserve and come on strong --
  with a Texan's swagger and a New Yorker's
  persistence.
• American entrepreneurs may tend to exaggerate
  what they are capable of, but conference
  participants said British entrepreneurs err too
  far in the opposite direction.
• If an American gives a presentation, we
  always divide by three. If an Englishman gives a
  presentation, you always get to multiply by 10,''
  said Peter Cochrane, the chief technologist at
  British Telecommunications.
• Associated Press

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Scandinavian business style

• Scandinavian business culture shares some
  characteristics with that of the Japanese.
  Saving face is important, and, rather than direct
  frontal attack, Scandinavians prefer a subtler
  approach. new ideas are better stated in quite
  general and vague terms initially in order to
  invite others into the process, note I. Holmberg
  and S. Akerlblom of the Stockholm School of
  Economics. Consensus is seen as a condition for
  dialogue and also as a preferred outcome of the
  dialogue. Old-fashioned virtues are in. Our
  business is built on trust. This means that we
  keep legalities to a minimum. We talk to each
  other, settle it, and get on with it.
• There is definitely a Scandinavian style of
  management, says Kevin Barham, coauthor of ABB
  the Dancing Giant. It is very informal. At the
  same time, it is very practical and down to
  earth. Unlike the British and the French, there
  is an aversion to paperwork. To some, the
  Scandinavian style is deeply bedded in what might
  ..be called vagueness. Informality and cultural
  sensitivity mean that Scandinavians can sometimes
  appear elusive. Where they stand, what drives
  them, and what they value can seem mysterious.At
  the same time, being up front and communicating
  openly is expected.
• Across the Board, June, 1999

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German management style

• The Germans are very disciplined and precise
  They do exactly what the boss asks them to do and
  what is agreed or put down in writing. A problem
  is that the Swedish notion of taking on
  responsibilities for yourself, the cornerstone
  of their work policy, is not perceived in the
  same way by the Germans, who have a tendency to
  adhere very closely to precisely defined rules
  and instructions.
• To implement a decision some notes on the back
  of a cigarette packet are often sufficient for
  the Swedes. In contrast, Germans are more
  comfortable adhering to formal procedures We
  need procedures and forms. Germans love
  administration because it provides us with
  security.
• P. Grol, C. Schoch, and CPA IKEA

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French management style

• Company life there is another world, where the
  most important thing is educational antecedents.
  French managers are extremely smart, picked
  precisely because of their educational track
  records. They talk well, communicate perfectly
  with each other, operate brilliantly within their
  own elite. But when a situation arises where it
  doesn't help to be clever, they may not perform
  well. They're not good at motivating downward.
  They're the opposite of the breezy, chummy,
  superficially friendly American manager. They
  talk to their secretaries and they talk to each
  other, and that's it. And yet, despite its
  weaknesses, the system serves itself well. Yes,
  because the bureaucrats and politicians in France
  are picked for the same reasons. That's why
  France is at its best when all these sides are
  working together, especially on something big and
  high-tech and glittery like the TGV train, the
  Ariane rocket launches, nuclear power, civil
  aviation. It's all stuff the government picked
  and fast tracked.
• WSJ 4/14/93 Interview with Prof. Peter Lawrence

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Negotiating with the Japanese

• Business communication in Japan differs from
  that in many other parts of the world. A
  characteristic of Japanese managers is the
  ability to listen and use non-verbal
  communication.
• The secret of negotiating with them is not to
  persuade by talking but to listen. The ability to
  listen is crucial in any bargaining context but
  it is especially important in Japan. To
  understand the other side's case correctly,
  listen carefully and interrupt only when you do
  not understand a point. The practice of listening
  and understanding does not mean that you agree.
  Silence often disturbs western negotiators,
  making them feel compelled to talk. They may then
  disclose more information than is necessary for
  the negotiation. Be less verbal and actively use
  silences and pauses. Do not forget that in Japan,
  silence is a virtue.
• No decision will be made at the first meeting
  and probably even at the second. Patience is
  another Japanese virtue.
• The Japanese frequently find it hard to grant
  concessions during the negotiation itself. This
  is because the bargaining position of Japanese
  negotiators is usually reached via a long
  internal discussion process before and during the
  negotiation
• Financial Times, 10/17/01

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Negotiating with the French

• Whenever you negotiate in France, avoid
  assuming a relaxed and informal manner as you
  might in, say, the US. Instead, be polite and
  formal... French business people tend to
  intellectualize. Unlike in Germany or the US,
  where the discussion jumps straight to the
  details, the negotiations in France are more
  likely to kick off with general principles and
  strategies. The application of these basic
  principles comes next then a rough outline of
  the content of the deal and lastly the details.
• If you want to come across as professional, ..
  be well prepared and self-confident, but not
  arrogant or presumptuous. Preparation in France
  means, above all, having command of a coherent
  argument founded on faultless logic. Avoid the
  hard-sell and any marketing gimmicks. Instead,
  your presentation should be sober, well-founded
  and rigorous.
• Your French counterparts will put much store by
  a sophisticated rhetorical use of language. This
  means that they appreciate elaborate and abstract
  communication. In their eyes, coming straight to
  the point is blunt and somewhat uncouth.

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Negotiating in Russia

• Negotiations are demanding and may become
  emotionally charged. You may find your Russian
  negotiator banging his or her fist on the table
  or leaving the room. Accept such tactics with
  patience and calmness. They are designed to put
  you off your stride.
• The disposition to make compromises may be seen
  as a sign of weakness. And that can mean that
  negotiations come to a standstill. If so, remain
  patient and keep some stamina in reserve.
• Frequently, although the Russian team may
  consist of many members, it will present a single
  opinion. The head of the negotiating team tends
  to dominate negotiations and is willing to make
  any concessions only if he can expect you to make
  concessions in return.
• Concessions that are easily achieved may make
  your partner suspicious, since his approach still
  derives from the culture of the former Soviet
  Union, where everything was complex and
  difficult. Even if you have strong arguments, do
  not overemphasize them. Russian business people
  are proud and want to be shown respect.

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Global management strategies

• Human resource issues
• Organization design issues

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What is a global manager?

• The traditional expat
• The home office national on long-term assignment
  to another country
• The global executive (aspatial careerist)
• The generalist with diverse language and cultural
  skills
• The global networker team player
• The aim in a global business is to get the best
  ideas from everywhere. Each team puts up its best
  ideas and processes - constantly. That raises the
  bar. Our culture is designed around making a hero
  out of those who translate ideas from one place
  to another, who help somebody else.
• Jack Welch

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The decline of the expat

• In some respects, the expatriate is a hangover
  from the old days of the multinationals, when
  managers were sent out from headquarters, like
  colonial governors, to run the overseas
  possessions. The aim is now to employ local
  managers who have been imbued with the culture of
  the organization. The trick is to achieve a
  balance to combine the strength of local
  knowledge with global reach.
• "But you need a balance between having a very
  international cadre and having a national
  presence," Richard Greenhalgh, head of management
  development and training at the Anglo-Dutch
  consumer group, Unilever, says. Five years ago,
  three of our four business heads in Italy were
  expatriates. Now they're all Italian. In a
  consumer business like ours, that's important.
• Financial Times, 10/8/1997
•  

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The new expat strategy Cross-posting

• (Unilevers)..board includes members from six
  different countries and virtually every operating
  company contains expatriates. We have an Italian
  managing our larger company in Brazil, a Dutchman
  in Taiwan, Englishman in Malaysia, and American
  in Mexico. ..Cross-posting establish unity,
  common sense of purpose, and understanding of
  different national cultures.
• Unilever executive

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What are the benefits and costs to the manager of
foreign assignments?

• Working abroad makes you more knowledgeable
  about the questions to ask, not the answers.
• I learned how to work in two culturesto
  compromise, not to be a dictator. Its very
  similar to two domestic cultureslike marketing
  and engineering.
• Im more open mindedmore able to deal with a
  wider range of people..because I ran into many
  other points of view.
• Because I only understood a fraction of what
  was really going on overseas, maybe 50 percent, I
  had to make decision on a fraction of the
  necessary information. Now I can tolerate
  nonclosure and ambiguity better.
• I increased my tolerance for other people. For
  the first time, I was the underdog, the
  minority.
• I used to be more ruthless than I am nowI was
  the All-American manager. Now I stop and realize
  the human impact more. I use others as
  resources. I do more communicating with others
  in the organization.

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The myth of the global manager

• In the early stages of its drive overseas,
  Corning Glass hired an American ex-ambassador to
  head up its international division. He had
  excellent contacts in the governments of many
  nations and could converse in several languages,
  but he was less familiar with Corning and its
  businesses. In contrast, ITT decided to set up a
  massive educational program to globalize all
  managers responsible for its worldwide
  telecommunications business in essence, to
  replace its national specialists with global
  generalists.
• Corning and ITT eventually realized they had
  taken wrong turns. Like many other companies
  organizing for worldwide operations in recent
  years, they found that an elite of jet-setters
  was often difficult to integrate into the
  corporate mainstream nor did they need an
  international team of big-picture overseers to
  the exclusion of focused experts.
• Bartlett and Ghoshal, HBR, 1992

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Should companies make or buy global
expertise?

• The buy option?
• Where are the best global managers?
• The make option
• Training programs
• Rotation
• Cross-functional, cross-product, and
  cross-national
• Teamwork and networking skills

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Jack Welch says hire Swedes

• We are trying desperately to hire more global
  people. There are certain people who are
  extremely comfortable in global environments -
  the Dutch, for instance, or the Swedes. Pound for
  pound, Sweden probably has more good managers
  than any other country. A Swede is a global
  traveler. It's global attitude. Among Americans,
  it is in shorter supply - although it is becoming
  easier with younger people. I think they see that
  if you are going to grow in GE, you are not going
  to have had a domestic background all your life.
  
• Jack Welch, Interviewed in the Financial Times
  10/1/97

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Most U. S. companies are behind in global
management training

• A survey of 50 large North American companies
  found
• only 25 have a global focus in their training
  programs
• only 4 offer cross-cultural training to all
  managers
• Yet, cross-cultural management is a minefield
• 10-45 expatriate assignments are failures

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Organizational designs for international
corporations

• The international corporation
• low localization high home office control
• The mature multinational
• high localization decentralized regional
  divisions
• The global corporation
• Centralized functions and product divisions run
  by globally-savvy executives
• The transnational corporation
• Localizing while maintaining product focus and
  functional expertise. Coordinate by culture,
  teams, and networks.

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How global is Wal-Mart?

• critics believe that the company retains a
  headquarters-knows-best mind-set. That raises the
  question, is Wal-Mart truly a global company, or
  just a U.S. company with a foreign division?
  ..Wal-Mart has few top managers who aren't
  American and few who speak more than one language
  and have been posted in several spots abroad.
• That might be one reason why some competitors
  scoff at Wal-Mart's claim that it's now sensitive
  to local tastes. "I get the impression that
  Wal-Mart is insisting on the American-style
  layouts and business approach," says Seol Do Won,
  marketing director at Samsung Tesco Co. in South
  Korea, which runs seven Home Plus stores. "It's
  good to introduce global standards, but you also
  need to adapt to local practice," he says.
• .. when Wal-Mart entered Canada in 1994, its
  blueprint specified what to sell and where to
  sell it--including liquid detergent and Kathie
  Lee clothing that flopped there.
• Business Week 9/3/01

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Whirlpools global centralization causes problems
in Europe

• "Whirlpool also angered German retailers and
  lost customers, competitors and employees say,
  because it regularly replaced its top managers.
  Company officials attribute the heavy turnover to
  the reorganization, a switch from operating along
  country lines to operating along product lines.
  They concede that the changes spurred some
  customer grumbling but say sales and profit will
  benefit in the long run. Because of the changes,
  however, Bauknecht's market share in Germany fell
  to 5 from 7, according to union officials.
  Whirlpool acknowledges a "small decline" but
  gives no numbers.

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Ford shifts from a global to a more local focus

• Under "Ford 2000,'' the No. 2 U.S. car maker's
  most sweeping management redesign to date, Ford
  sought to forge its functional departments --
  such as new-car development -- and its
  geographical fiefs into a single global
  automotive operation, pursuing the product-based
  model. A Ford spokesman says the reorganization,
  begun in early 1995, saved 5 billion during the
  first three years, primarily through swifter
  product development and the adoption of
  world-wide manufacturing standards.
• However, it cost Ford some of the ground it had
  gained in Europe. By January 2000, the company's
  European market share had slipped to 8.8 from
  13 five years earlier. Between 1996 and 1999,
  four different executives oversaw its European
  operations.
• Early last year, Ford shuffled senior
  management again, restoring some of its regional
  executives' lost authority. They gained more
  power to decide what kinds of cars and trucks to
  make and how to market them. Ford called the
  partial retreat a "refinement'' of Ford 2000.
• WSJ 6/27/01

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So does GM

• ..it appeared last week that GM had agreed to
  a code of conduct designed to eliminate
  bureaucratic overlap within the company's
  European operations. The guidelines address
  worries that Opel was being forced to accept too
  many compromises in the interests of GM's
  globalization.
• "The idea is to help the company get back to
  its success" of the early 1990s, David Herman,
  the outgoing chairman of Opel, said in an
  interview. "We want to nurture local advantages
  in a way that doesn't denigrate globalization.
  (Moreover) most of GM's International
  Operations division (will move) from Zurich to
  Detroit.
• Together, the moves amount to taking GM's
  European operations back to the way they used to
  be run in the late 1980s, when GM Chairman Jack
  Smith was head of GM Europe and the company's
  Zurich staff coordinated more than it commanded,
  people familiar with the situation say.
• That structure, along with aggressive
  cost-cutting and investments in new models, paved
  the way for Opel's market success with models
  such as the subcompact Corsa, which together with
  the Opel Astra are the lead products in GM's
  emerging-markets strategy.
• But Opel executives soon began complaining of
  growing bureaucracy as the international
  operations division asserted greater influence
  over Opel's European product development,
  production and marketing operations.

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And Exide, too

• Last year, Robert A. Lutz, chairman and chief
  executive of Exide Corp., launched a master plan
  to help turn around the money-losing battery
  maker and solve a thorny business problem.
• Exide's structure -- built around 10 separate
  country organizations -- was encouraging its
  managers in Europe to undercut one another's
  prices. They were "driven to maximize their own
  results -- even if it was at the price of their
  next-door neighbor, who also was Exide," says Mr.
  Lutz. "The guys were poking each other in the
  eye.''
• So, Mr. Lutz spent about a year and 8 million
  crafting a new structure for the 2.4 billion
  company. In place of the geographical fiefs, he
  formed global business units to manage the
  company's various product lines, such as car
  batteries and industrial batteries for high-tech
  gear.
• But that gave rise to new problems. Half of
  Exide's top European managers resigned. And when
  Exide made an important acquisition, it worried
  that a top executive it wanted to keep would be
  miffed if his turf got swallowed up by one of the
  new units. Soon, Mr. Lutz was tinkering with
  Exide's structure again, tilting the
  organizational seesaw back toward the geography
  plan.
• Wall Street Journal

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The transnational corporation managing globally
with a network of specialists

• Success in todays international climate a
  far cry from only decade ago demands highly
  specialized yet closely linked groups of global
  business managers, country or regional managers,
  and world-wide functional managers. This kind of
  organization characterizes a transnational rather
  than an old-line international, multinational, or
  global company. Transnationals integrate assets,
  resources, and diverse people in operating units
  around the world. Through a flexible management
  process in which business, country, and
  functional managers form a triad of different
  perspectives that balance one another,
  transnational companies can build three strategic
  capabilities
• Global-scale efficiency and competitiveness
  (product mgrs)
• National-level responsiveness and flexibility
  (country mgrs)
• Cross-market capacity to leverage learning on a
  worldwide basis
• (functional mgrs)

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Decentralizing product responsibility in the
transnational company

• Many traditional multinational companies have
  made the mistake of automatically anointing their
  home country product-division managers with the
  title of global business manager. Sophisticated
  transnational companies, however, have long since
  separated the notions of coordination and
  centralization, looking for business leadership
  from their best units, wherever they may be
  located. For example, Asea Brown Boveri, the
  Swiss-headquartered electrical engineering
  corporation, has tried to leverage the strengths
  of its operating companies and exploit their
  location in critical markets by putting its
  business managers wherever strategic and
  organizational dimensions coincide. In ABBs
  power-transmission business, the manager for
  switchgear is located in Sweden, the manager for
  power transformers is in Germany, the manager for
  distribution transformers is in Nortway, and the
  manager for electrical metering is in the United
  States
• Barlett and Ghoshal, HBR, 1992

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Unilevers transnational organization
Coordinate specialists with networks and
culture

• The very nature of our products requires
  proximity to local markets economies of scale in
  certain functions justify a number of head office
  departments and the need to benefit from
  everybodys creativity and experience makes a
  sophisticated means of transferring information
  across our organization highly desirable. All of
  these factors led to our present structure a
  matrix of individual managers around the world
  who nonetheless share a common vision and
  understanding of corporate strategy.
• ..In our case, thinking transnationally means an
  informal type of worldwide cooperation among
  self-sufficient units..everyone must..share the
  values that lead to flexibility on every level.
  In a worldwide company, incorporating both unity
  and diversity, business strategy and structure
  are inextricably linked and always evolving.
  ..The head office recognized the need for common
  culture among many scattered units and set up
  formal training programs aimed at the
  unileverization of all its managers.
• Unilever executive

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Nissan globalizes its design teams

• Nissan Motor Co. will make its design teams
  more multinational and multicultural by raising
  the number of non-Japanese designers to 10 of
  the total.
• The move is aimed at breathing new life into
  the automaker's underachieving design studios.
  Carlos Ghosn, Nissan's chief operating officer
  who is originally from French automaker Renault
  S.A., has pointed out that the lack of design
  sophistication in Nissan vehicles is partially
  responsible for sluggish sales.
• Nissan also plans to facilitate exchanges
  between its Japan-based designers and those at
  its overseas design studios and Renault. In
  addition, newly hired foreign designers will be
  compensated based on their performance.
• Currently, only two of the 200 designers in
  Nissan's design division are non-Japanese. The
  nation's second-largest automaker plans to raise
  that number to at least 20 in the next two to
  three years
• Nikkei Interactive 1/22/00

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But cross-national teams may have trouble
integrating

• Steve Redwood, a London-based management
  consultant with Price Waterhouse, tells of a
  client who had assembled a team from eight
  different countries to work on a project. "The
  national stereotypes applied," he says. "The
  people from Switzerland and Germany were mainly
  interested in the way the project was organized.
  The people from Spain took a much more intuitive
  approach. The British displayed a high level of
  skepticism on whether the whole thing really
  mattered. Language was not the issue. It was more
  basic than that."
• Behind this lies the most fundamental problem
  of all the fact that outside a handful of
  companies - Mr. Bryan of McKinsey puts it at
  between a dozen and 20 worldwide - even the
  biggest corporations are dominated by the culture
  of the home country.
• "Outside that handful", Mr Bryan says,
  "companies are very German, or very British, or
  very American. One big difference with American
  companies is they assume globalization means
  Americanizing the world. Others don't have that
  arrogance.
• Financial Times 10/08/97

41
Takeaways

• Global savvy is indispensable for success in
  todays economy
• Companies should step up their efforts to select
  and socialize for it
• But the pure global manager, like the pure global
  corporation, is a myth
• While international assignments have many
  benefits, most people function best in their home
  country
• The trick in global management is to leverage
  corporate culture and networks in getting the
  right mix of country, product, and functional
  expertise

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Class business

• Thursday 11/15
• Course evaluations
• Review session
• Hand out exam case
• Tuesday 11/20 International panel