A world difference

Beyond the superficialities of knowing how low to bow, how much cultural difference is there really?

When in Japan, make sure that you accept business cards with both hands. In the Netherlands, don’t introduce employee of the year awards into your firm because they will be ridiculed. In the UK, your counterpart’s politeness in negotiation does not mean that they accept your position.

Sound familiar? These and many other observations have become a staple of the cultural awareness industry, appearing everywhere from management textbooks to business school seminars. We smile at such differences and know them to be, by and large, true.

For international managers, on the other hand, this plethora of advice about potential pitfalls can be bewildering and anxiety-inducing. But beyond the superficialities of knowing how low to bow, how much difference is there really?

Conventional wisdom states that there’s a lot. Looking at the contexts of different countries reveals many clear variations that may affect how organisations are run. Employment legislation, governance structures, the centrality of the state, the nature of the workforce, the strength of unions and even climate may be significant. No one would doubt that such differences are important.

As well as these, there are variations in national culture – a much less tangible but seemingly more significant issue. The theory here is that the value system of a country will determine the HR practices within the organisations of that nation. For example, the US culture of individualism supports ideas of self-sufficiency, personal achievement and single-status working. Confucian values in China, meanwhile, support deference to age, collective endeavour and a strong work ethic. This is standard textbook fare, but how significant are these differences to HR management practice?

A study conducted by Judge Business School, University of Cambridge, in collaboration with Cornell, Insead, Erasmus and Tilburg universities, examined the HR practices of 30 multinational companies. These included BT, EDF, IBM, Ikea, Matsushita, Oracle, Procter & Gamble, Samsung, Sanyo, Siemens and TCL. We were interested in how HR practices were organised in international contexts. We found that while national cultural differences were not insignificant, they were less important than we had imagined. Organisational culture actually had more influence on HR practice.

When considering international HRM, there are three possible views you can take. First is the idea of convergence – the belief that all HR practices are moving towards a single approach that transcends national borders. This is tied up with the notion of “best practice” and is supported by the globalisation of markets and the spread of HR technologies, among other factors. Many people believe that convergence largely means the adoption of US practices, but multinational firms are eclectic in their choices – look at how many Japanese management techniques have become globally embedded.

The second view is that practices are actually diverging. The theory is that national cultural differences are critical and that there are no HR best practices, only culture-bound ones. The third view lies between the other two, arguing that certain practices are pervasive but that the national culture influences them and makes a distinctive practice.

In our study, we assumed that the third way would apply. We were looking at a highly select group of multinational companies, so our conclusions should be set in this context.

We studied both a range of HR practices and the operation of the HR function. In performance management we might have expected a large divergence of views in areas such as pay for performance or merit-based promotion, but we found little or no difference across the world. We witnessed a concerted effort on the part of group HR departments to maintain global performance standards supported by global competencies (at foundation, managerial, technical and leadership level), common evaluation processes and common approaches to rewards. It was difficult, therefore, to find many distinctive local practices.

Where national regulatory systems did vary – particularly when it came to union representation – there were differences of approach with regard to wage determination and the managerial prerogative (the ability to “flex” the workforce in terms of performance and, specifically, underperformance). But these differences were driven by regulatory criteria rather than variations in values.

In the development field, coaching was typically aligned to transformational leadership initiatives. Short-term strategic projects, often international in scope, were commonly assigned to high-potential employees to assess their capabilities. Reinforcing this was the increasing centralisation, particularly through the use of “process excellence”, of the design and delivery of common processes from HQ.

Areas of global focus for most of the companies included the development of senior managers, the application of competency frameworks to ensure consistency and the use of common performance management criteria. Another key concern was the global brand and values of the company and how these affected HR policies and practices. Ensuring that what HR delivered matched these global values demanded a common set of approaches, which meant that differences in national culture became marginal to the organisations’ cultures.

In Japan, a country where we thought there would be big differences, we saw evidence of convergence. At Sanyo, we took part in the early-morning exercises with staff before work and went to karaoke with executives in the evening, which for us was a very different experience. But in the workplace we saw the introduction of global performance standards and the decline of national staples such as tenure-based pay, egalitarian salary structures and guaranteed lifetime employment.

Particularly in the HR function, we observed a uniformity of structure and approach, with organisations having global HR, regional HR, country/territory HR and shared service centres. The companies in our sample had adopted similar forms of administrative HR service provision, enabled by significant advances in IT.

There were recognised meetings – for example, annual conferences of senior HR managers and regular face-to-face meetings of global HR practitioners. Cross-functional working and decision-making structures were common.

This is not to say that there were no local adaptations. IBM altered its recruitment and management development activities in emerging markets. But its reasons were more to do with relativities in economic development than national cultural sensitivities. Rolls-Royce recognised that traditional, western-style performance appraisals and forms of upward feedback could be problematic in Asian countries. Other western-based multinationals were careful when it came to recognising individual achievement in countries with collectivist cultures. But even here we saw in many cases that the companies took a “non-negotiable” approach to their global practices. The local variations they allowed were minor.

Should we be surprised by any of this? In one way, not really. We were studying multinational companies, and it’s clear from other research on multinationals that there is an institutional effect on HR practices – in other words, companies imitate the practices of other successful firms to gain legitimacy, a process aided by the spread of ideas through elite consultancies, management journals and business schools. Also, the war for talent is becoming increasingly international in scope.

But in another respect it is surprising that the strength of national culture does not seem to have such a significant hold over organisations as conventional wisdom would have us believe. A clue to why this may be lies in a reinterpretation of research conducted by Geert Hofstede, the Maastricht University professor whose theories led to much of the literature on cultural differences.

A 2005 study, National Culture and Human Resource Management, reviewed Hofstede’s data and found that, contrary to standard interpretations of the research, the effect of the country explained only a 2-4 per cent share of the variance in respondents’ values, and that organisational differences accounted for more variance in cultural values than did country differences. This is not to dismiss Hofstede’s work or the valuable studies and ideas that have emerged from it. It is simply to argue that national cultural values explain only a small amount about how individuals behave in an organisation.

So it is likely that common HR practices across borders may be appropriate. Is this a cause for regret? Rather like seeing the same shops on the high street of every other town we visit, we might yearn for a little diversity. But organisations seek what works – and, for HR in multinational companies, the range of options is limited to a few common practices that are believed to secure high performance.

It is obvious that national cultures differ and that such differences cannot be ignored. What does this mean for HR practice? From our research on multinational companies, the answer seems to be: not very much. There is a great deal of similarity in how these firms manage their human resources. Bigger differences exist, and these are more salient in terms of organisational culture. We did see local adaptations of global standards, of course, but these were often to do with a particular country’s regulatory practices, labour market issues and stage of economic development, rather than its cultural values.

To think there is one best way to manage human resources is simplistic and wrong, but the variation and the contextualisation of HR, at least for the companies we studied, owes little to national culture.

Philip Stiles is senior lecturer in organisational behaviour at Judge Business School, University of Cambridge p.stiles@jbs.cam.ac.uk

Further information

  • B Gerhart and M Fang, “National culture and human resource management”, International Journal of Human Resource Management, 16:6, June 2005.

The global HR research alliance

  • Judge Business School, University of Cambridge: Philip Stiles and Jonathan Trevor
  • Cornell University: Patrick Wright and Shad Morris
  • Insead: Günther Stahl
  • Erasmus University/Tilburg University: Jaap Paauwe and Elaine Farndale

How the research was conducted

Our study covered 19 companies in depth, interviewing people at different levels to find out how they understood their context and experience of HRM. We selected these companies on the basis of their international scope.

The interviews (15-20 per case) were held at corporate, regional and country level. We spoke to HR professionals and also a sample of senior managers and line managers.

A web-based survey of 20 multinationals formed the second stage of the research. A total of 263 participants – drawn from the Americas, Asia-Pacific, Europe, the Middle East and Africa – responded.

This online survey contained questions on six key areas of HR practice (staffing, training and development, appraisal, leadership and succession, reward and employee relations); HR delivery mechanisms (including outsourcing, shared service centres, web-based HR, offshoring and onshoring); local leadership; and knowledge management.