Leadership and Change Management

A Cross-Cultural Perspective

Daphne Halkias, Joseph C. Santora, Nicholas Harkiolakis, Paul W. Thurman, Daphne Halkias, Joseph C. Santora, Nicholas Harkiolakis, Paul W. Thurman

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780367595364
• eBook ISBN: 9781317107040
• Topic: Business
• Subtopic: Business General
• Index: Business

A leader's role in the management of change is a critical issue for successful outcomes of strategic initiatives. Globalization and economic instability have prompted an increase in organizational changes related to downsizing and restructuring in order to improve financial performance and organizational competitiveness.

Researchers agree that a leader's inability to fully understand what is needed in order to guide their organization through successful change can be a reason for failure. Proper planning and management of change can reduce the likelihood of failure, promote change effectiveness, and increase employee engagement. Yet, change in organizations must be viewed as a continuous activity that affects both organizational and individual outcomes. If change management can be considered as an event induced by socio-cultural factors, the cultural variable gains greater significance when applied to the quality of the relationship between a leader and their team. Many organizations today are on the verge of internationalization. It is here that the cultural context can affect behaviors and, in the same way, leadership style.

The research presented in this book by an eminent group of scholars explores the influence of culture – ethnic, regional, religious – on how leaders manage change within organizations.

1 Change leadership in a cross-cultural context

A case study of Italy and Australia

Mary Barrett

Overview

Successful leaders of change are wary of simple, mechanistic, step-by-step views of achieving change. Rather, they recognize that organizations are always in motion and that change emerges from many pressures and directions, even though management may be able to steer the change to some degree (Clegg, Kornberger and Pitsis, 2005; Pettigrew, 1985; Van de Ven and Poole, 1995). In the case that follows, the different cultural profiles of Italy and Australia and the family nature of the business made change both easier and more difficult. Further, the fact that a husband and wife team, Catherine and David, managed the business together – albeit in different roles and with different management styles – is important to understanding why change was difficult and how it was managed successfully.

Background to the case

Harris Farm Markets is an Australian grocery chain that specializes in fruit, vegetables, delicatessen, and other grocery items. Established in 1971, with a single shop in Villawood, New South Wales, Australia, it was the first Australian fruit and vegetable company to open a supermarket-style operation. It currently enjoys the highest customer rating on product review.com.au for major supermarket chains in Australia (ProductReview, 2015).

Method

Catherine Harris was interviewed at the Harris Farm Markets’ main premises in Sydney. At the time of the interview, her husband, David Harris, the founder of the business, was still the CEO. He has since passed on the leadership of the business to three of his five sons. Other family members in the business include Angus Harris (co-CEO), Luke Harris (co-CEO), Tristan Harris (co-CEO) and Catherine Harris (chairperson).

Ms. Harris talked at length about her life in the business and outside it, but the case focuses on a time when Ms. Harris was charged with making major changes to the business after a goods and services tax (GST) was introduced in Australia on 1 July 2000. The new legislation required many businesses, especially small ones, to operate more formally and transparently than they had done previously. The case primarily reflects Ms. Harris’s viewpoint, but the author’s observations during site visits also contributed to the case.

Analyzing Catherine’s story

Catherine recalled the way the business got started:

When I look back on it, [I see that] it was a good thing that we [David and I] both came from family business backgrounds. We met when we were both studying business at university. Seeing how it’s such a big part of my life now, it’s odd to think that, for the first 27 years or so, I had very little direct role in it. Not even David originally expected to go into the fruit and vegetable business. His dad had run a successful chicken processing firm, but he sold it to a multinational. David had expected to take it over, but the sale put an end to that idea! So David had to find his own path. He learned the practical side of fruit and vegetable wholesaling and distribution in another firm, before buying a business of his own.

Looking back on her experience, Catherine said that her contribution to the family firm’s knowledge base was to gain corporate skills in a retailing environment:

David was off learning the [fruit and vegetable] business so I had to go and work. What we decided was I’d go to [M., a large, established Australian retail business] and learn the corporate side. What ended up happening was I never got out of that. David’s business went like this [gesture indicating rapid growth] on the entrepreneurial side and I stayed at M., and then had babies. In those days, the minute you had babies you were out of the workforce. As soon as M. found out I was pregnant there was a huge celebration, but the clear assumption was that I would be leaving. So I left. I then had five children very rapidly, but worked the whole time doing various things. I worked in Mum’s business.

As well as working in her mother’s business, she started one of her own, in communications and public relations. Both David’s and Catherine’s firms went very well for a while, but then both hit problems around the same time. David’s business faltered in the currency collapse of the late 1980s and a major client of Catherine’s firm went bankrupt. Catherine recalled it as a very stressful time, and decided to make sure she could be the family breadwinner if necessary:

I realized that I might be the income earner. My business was terrific and very glamorous, but my main client was going down, and I suddenly thought that it might be me in charge of the five children and the husband, so I’d better get a real job. I applied for a job at [an Australian university] as head of their alumni section and I was offered that job. So I then had a real job with real money and I felt secure. At least I knew we had enough to feed the kids.

While her husband’s business struggles continued, Catherine was headhunted for a highprofile government job. Her expertise in managing large corporate organizations, especially guiding them through large-scale change, was becoming increasingly recognized. As she said about her increasing public profile: “I became a bit of a change management guru person.”

Catherine finally entered the family business at her husband’s invitation to solve a specific business problem in the firm. When the Australian tax system was overhauled in 2000, the informal, cash basis for running her husband’s business was no longer appropriate. Many changes imposed on firms from the outside, such as new legislation, require adaptive rather than large-scale change. However, David was worried that the extent of the overhaul needed could threaten the viability of the firm, which had already experienced – and recovered from – major problems in the past. As Catherine put it: “David said to me that he didn’t want to make the mistakes he made last time and he needed me in to corporatize [the family firm].”

The way the firm was being run was virtually incomprehensible to Catherine who was used to the formal governance approaches of public sector entities and large corporates in Australia:

It [David’s firm] was weird. It was a closed book – it had next to no formal systems. And yet it worked – it had for years. And, frankly, it intrigued me how it could have operated like this for so long. But it had to change – the new tax rules meant we couldn’t go on the way we had before.

A major problem was that running a business on more transparent lines ran counter to the cultural traditions of the employees, many of whom who had emigrated to Australia from Italy. According to the current Index of Economic Freedom (2015), Italy is only the 80th freest economy in the world. The Italian economy remains burdened by political interference, bureaucracy, corruption, high levels of taxation, a rigid labor market, an ineffective judicial system, a complex regulatory framework, and the high cost of conducting business (Capuano, undated). Some aspects of the Italian way of doing business were reflected in the way David’s business was managed, including the fact that it was run largely on a cash basis. As Catherine explained:

One big problem was that the business ran on a cash basis. We had accounting systems, but it wasn’t just a case of adding your GST on. I think that was part of the reason why there was so much secrecy, because everybody dealt in cash.

…One of the things that we have spent the last five years doing is getting rid of every bit of cash in the business. … In a way it makes us non-competitive, because every other fruit market out there pays everybody $250 a week on the books and $500 in their hand. That is absolutely standard. It’s the black economy. … It was just how you got staff. You didn’t get staff by employing people on the books. They were all migrants, mostly from Italy, and nobody trusted the government.

Catherine’s approach was to incorporate some ‘Italian’ aspects of the firm into her management style as a way of changing the way it ran. Italy has a very large percentage of family-owned small and medium-sized enterprises (SMEs), and even some of the largest corporations such as Fiat, Ferrero, Benetton, Mediaset, and so on are still controlled by single families (Capuano, undated). Because of the strong influence of family in Italian society and business, management structures are often weak. Most, if not all, of the decisions are made by the owner of the business, by the family, or by the very few key decision makers in a company. Italians respect and admire decision makers and leaders and accept their position in authority more than Australians do. This is reflected in the fact that Italy scores higher (50) on ‘power distance’ than Australia (36) (Hofstede Centre, undated). However, often a manager’s power is determined by the strength of the relationships that a person has with the senior management or the owner of the business. Even though David was not Italian, his management style had adapted to the approach his workers were familiar with. As Catherine described it:

He [David] has a real caring for the people who work for the firm. It’s not even really paternalistic. He genuinely sees them as his colleagues and workers, and there is a tremendous lack of hierarchy. My husband is not a very outgoing person. He’s the strong silent type, and he loves the way his staff come and speak to him and share with him. He’s a confidante. That’s probably why it worked, having 500 employees and no systems – they felt part of the family. And in this business, of course, you really do rely on trust, because people still pay cash for their fruit and vegetables and it’s a huge cash business. We don’t touch it [cash] at all now because it just goes into the till and we have people to come and collect it and take it away. But in the [retail] shops it’s there every day.

Catherine, rather than her husband, had the detailed, technical knowledge of how to add the architecture of structure and formal systems to a family firm. An early move was to implement a computerized accounting system. However, to do this, she had to deal with a deeply rooted ‘family values’ culture that opposed the changes she wanted. ‘Familiness’ – or the special bonds between firm members that are part of operating as a family firm – create many positive aspects, such as an ability for the firm to make and act on decisions quickly, a bias towards long-term rather than the short-term goals, and connectedness with the local community (Habbershon and Williams, 1999; Habbershon, Williams and MacMillan, 2003). Nevertheless, familiness can have a downside (Miller and Le Breton-Miller, 2005). Habbershon et al. (2003) refer to the ‘distinctive’ (positive) and ‘constrictive’ (negative) aspects of familiness. Because of the informal, even secretive way of making transactions both inside and outside the firm that was part of this family firm’s traditions, staff resented Catherine’s efforts to put in systems that accounted for transactions in a transparent way. They particularly disliked the fact that she had a formal title: executive director. As Catherine noted:

People absolutely hated it [the title]. In fact, people even said that it used to be a family company before I came in, because I was getting rid of all the cash and making people do things, and sign dockets and so on.

Later, Catherine downplayed the title and made the most of the family firm’s family culture. One of her tactics was to work through her husband, the firm’s respected ‘front person’, its operational face, to persuade others to make changes. But this meant changing her husband’s way of doing things as much as the way the firm did things. While this corresponds to the Italian approach – working through a close personal relationship with the CEO – it was still a difficult task:

He [David] felt threatened. He didn’t personally feel threatened, he just felt that it would all fall apart, that it wouldn’t work. He was terrified that things would fall apart again. I started getting David to have managers’ meetings and at the meetings I’d bring up occupational health and safety and everybody would roll their eyes. It wasn’t until David really started hammering people that it changed. I didn’t have an influence on changing the firm – I just changed the CEO … I don’t think anybody else could have done what I did, not because I have the skills, but because I have David’s trust.

Other aspects of David’s management style were also a target for change. According to Catherine, her husband is “a definite person, and a bit of a dictator, and he doesn’t like change.” This manifested itself in his reluctance to consult staff before making changes in the business. David, unlike Catherine, had not worked in a range of other organizations before starting his own firm. So he lacked some of the conventional corporate disciplines. In Catherine’s words:

Men like David, and other men who haven’t been through that external experience, have missed out on consultation … I keep my ties strongly with the university, and there you wouldn’t do anything without consultation. Also, in big business you consult on everything, even more so than universities. It’s the same in the public sector … So you learn this word ‘consultation’. These chaps that have gone out and started their own business, that word ‘consultation’ never enters their heads.

Catherine brought skills from the domestic sphere into the business arena. Despite acknowledging that her skills had pointed to the type of change needed in the business, Catherine consistently dismissed my suggestions that she was in fact a leader in the firm. On the contrary, she regarded her capacity to get things done in an indirect way as a ‘female’ skill:

I’m sure wives bring that to family companies. Because as a mother, you don’t get anything with power, you only get the kids to do things by cajoling – that’s how you operate. Whereas David just says something and he expects it to be done. I think that somehow women bring that into the workforce so I sort of hold David’s hand through these things and at least he appears to be consulting.

Catherine worked on the business as invisibly as possible, given the demands created by the scale of change she implemented. She never sought operational roles and insisted that firm strategy was her husband’s territory: “He’s the main strategist. Without him, there wouldn’t be a business.”

Measures of success and lessons for others

Part of the cultural success of the business, in Catherine’s view, is that it still has the “look and feel” of a family business, but without the downsides that had made it a poor fit with the demands in Australian society for clarity and transparency. In view of her reluctance to describe herself as a leader and to draw lessons for others from her experience, we can conclude that Catherine recognized how to work subtly with – rather than against – the cultural norms of the business, respecting its family nature and the spirit, if not the detail, of the Italian modes of business operations that its employees were familiar with. Catherine’s influence manifested itself in the way she maintained the ‘front stage’ and ‘back stage’ division of labor between her and her husband, which made them more effective in combination than either would have been alone. Undoubtedly, however, without Catherine, there would not be a business run on professional lines.

References

Capuano, M. (undated). Challenges of doing business in Italy. La Gazzetta Italiana. Retrieved from www.lagazzettaitaliana.com/italy-business.aspx (last accessed 12 December 2016).

Clegg, S., Kornberger, M. and Pitsis, T. (2005). Managing and organizations: An introduction to theory and practice. London: Sage.

Habbershon, T. G. and Williams, M. L. (1999). A resource-based framework for assessing the strategic advantages of family firms. Family Business Review, 12, 1–25.

Habbershon, T. G., Williams, M. L. and MacMillan, I. C. (2003). A unified systems perspective of family firm performance. Journal of Business Venturing, 8(4), 451–465.

Hofstede Centre. (undated). Comparing countries. Retrieved from http://geert-hofstede.com/countries.html (last accessed 12 December 2016).

Index of Economic Freedom. (2015). Country rankings. Retrieved from www.heritage.org/index/ranking (last accessed 12 December 2016).

Miller, D. and Le Breton-Miller, I. (2005). Managing for the long run: Lessons in competitive advantage from great family businesses. Boston, MA: Harvard Business School Press.

Pettigrew, A. (1985). Awakening giant: Continuity and change in ICI. Oxford: Blackwell.

ProductReview. (2015). Supermarkets. Retrieved from www.productreview.com.au/c/supermarkets.html (last accessed 12 December 2016).

Van de Ven, A. and Poole, M. (1995). Explaining development and change in organizations. A...

Table of contents

• Cover
• Title Page
• Copyright Page
• Table of Contents
• List of contributors
• 1 Change leadership in a cross-cultural context: a case study of Italy and Australia
• 2 Leading organizational change in a Brazilian multinational: crisis and restructuring in Globo organizations
• 3 A leader with open mind and heart: a case study on leadership and change management from Colombia
• 4 The role of change management in Cypriot organizations
• 5 Young, Estonian and female: a leader of the new generation
• 6 Leadership and change management: Regards Croisés from small and large companies in France
• 7 It is not a way of making money; it is a way of life: the Apivita case
• 8 Leadership and change management: an Indian perspective
• 9 Leading an expatriate workforce
• 10 Leadership and change management: case study of a manufacturing firm in Lebanon
• 11 Te toka tū moana: Māori leadership in Aotearoa New Zealand
• 12 Living the Shell core values
• 13 Leadership and change management: a cross-cultural perspective from Russia
• 14 Aye bin? Leading a changing ‘traditional’ Scottish family business
• 15 Transformative leadership: a Swedish case
• 16 The impact of early multicultural experience on later creative leadership: a case study of the influence of Barack Obama’s early years
• 17 Special topic: leadership and change management in military training programs
• Index