International Organizational Behavior

Transcending Borders and Cultures

Dean Mcfarlin, Paul Sweeney

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317300632
• Edition: 2
• Topic: Business
• Subtopic: International Business
• Index: Business

This book focuses on understanding and managing organizational behavior in an international context, considering the conceptual framework of culture and offering practical advice for navigating cultures in the workplace. Readers will gain new tools to interpret behavior, helping them to manage international challenges effectively.

The authors outline the critical management and adaptation skills necessary to develop within a globalized organization, teaching the reader how to recruit, coordinate, and evaluate an international team. Updated "Culture Clash" and "Global Innovations" boxes provide important insights into identifying a core set of values to "customize" management techniques across cultures, focusing particularly on growing countries like India and China. The new edition features a more streamlined chapter structure, updated discussion questions, and new end-of-chapter cases with self-scoring quizzes for further development.

International Organizational Behavior will prove a valuable resource for any student of organizational behavior, international management, and international business. A companion website provides additional support for instructors, featuring an instructor's manual, test bank, and PowerPoint slides.

Part 1

The Role of Culture in Organizational Behavior

CHAPTERS IN THIS PART:

1. International Organizational Behavior: Challenges and Options for Management

2. Cultural Frameworks: Understanding Attitudes, Values, and Behavior

3. Managing Conflict with Effective Communication and Negotiation

1

Chapter 1

International Organizational Behavior: Challenges and Options for Management

“People need to come first in the mix. As companies seek to build local operations in countries such as Brazil, Russia, India and China, identifying and tapping local talent pools becomes increasingly important. Striking the right balance between standardization and localization is always a work-in-progress, but the vast cultural and language gaps from country to country demand it. The days of overseas operations run exclusively by expats are over.”

—Miles White, CEO of medical/pharmaceutical firm Abbott

“If one day you’re asked to manage a supply chain in Malaysia, the next day you’re managing your virtual team in China, and the next you’re optimizing your company’s call center in India, you know that it’s just not possible to be an expert in every culture or geography in which you do business. What is possible is developing the mindset of a globalist—or, in other words, mastering cross-cultural core competency.”

—Denise Pirrotti Hummel, former CEO of Universal Consensus, a cross-cultural advisory firm helping businesses to succeed across cultures¹

“The aspects that I see motivating in global work are the excitement of how we overcome small misunderstandings and other common challenges [of cross-cultural collaboration], witnessing the people from totally different cultural backgrounds getting together for a common goal and succeeding together.”

—Oliver, an Italian employee working in a Finnish multinational corporation²

Collectively, these comments capture both the common management and talent challenges facing multinational companies today as well as the satisfaction and learning that can occur when people solve cross-cultural workplace challenges. They also hint at the complexities associated with managing culturally diverse teams that may be scattered around the world, given that rapidly growing countries such as India and China are where multinationals see the biggest opportunities. Indeed, successfully expanding overseas requires a variety of critical management skills and abilities, including being adaptable and innovative. It also means being able to recruit, develop, motivate, and coordinate a far-flung global workforce, including multicultural teams, that might be operating across dozens of countries. In doing so, international managers must somehow grasp and then bridge myriad cultural differences while scouring the planet for the best talent and spurring innovation. At the same time, they must also fight off nimble competitors who pop up overnight with new products and services driven by the latest technology. Successfully managing organizational behavior in today’s dynamic international environment is a tall order.³

Indeed, technology enables 24/7 business operations. And since employees anywhere can interact at any time, recruiting people from all corners of the world, as well as offshoring jobs, is easier than ever. Not surprisingly, the process of globalization—the increasing interconnectedness of national economies around the world—is fueled, in part, by technological advances. Over the long haul, globalization should continue to spur international business growth.⁴

But the interdependence that globalization brings also means that problems in one part of the world can quickly spread elsewhere. Moreover, rapidly growing nations such as China and India are producing home-grown companies in recent years that are challenging the dominance of multinationals based in developed markets, in everything from product innovation to hiring the best talent. Several developing countries now have a total gross domestic product (GDP) over $2 trillion, with China arguably surpassing the U.S. in 2015, at least when purchasing power parity is taken into account ($19.4 trillion versus $17.9 trillion, respectively). Small wonder then that increased international competition and the loss of key talent were listed among the top five threats executives said they were most concerned about.⁵

Chapter and Book Goals

That said, the challenges associated with managing organizational behavior across national and cultural boundaries are among the most vexing international firms must deal with. Our goal, therefore, is to use this first chapter to set the stage for the rest of the book. We’ll sketch out the important shifts that have taken place in recent years and examine key trends facing companies today as they manage people across cultures and borders. After that, we will present important conceptual foundations that will be used throughout the book.

Globalization: The Rise and Advance of Emerging Markets

The strongest economic growth has been in developing countries rather than in traditional heavyweights like the EU, Japan, and the U.S. Consider that between 1989 and 2015, China’s annual GDP growth rate averaged over 9%, more than three times the comparable figure in the U.S. Likewise, developing nations have been the top recipients of foreign direct investment (FDI) in recent years. For instance, in 2014, four of the top five recipients of FDI were developing countries, including China and Brazil (the U.S. was the only developed nation in this group). Indeed, Brazil, Russia, India, China, and South Africa have been tagged as the “BRICS,” an acronym underscoring their status as developing countries on the move. That said, nothing in international business is static and the BRICS countries also face a variety of ongoing challenges, from corruption to slower economic growth. Other developing countries such as Indonesia, Malaysia, and Mexico may emerge as the next set of economic high flyers. In short, the BRICS acronym may need to be rewritten. Regardless, in 2014 developing nations received more than 50% of the world’s total FDI compared to just 30% in 2005.⁶

By 2020 or so, the rise of developing nations may create more than 700 million new members of the middle class. In short, developing countries will have a citizenry that is more affluent and has more disposable income to spend than ever. No wonder established multinationals view them as huge potential sources of new customers. For instance, McDonald’s is hoping to build 1,500 new restaurants in China, Hong Kong, and South Korea over the next few years—thanks, in part, to China’s burgeoning freeway system and love affair with cars.⁷

As they look for opportunities around the world, multinational firms are increasingly looking to developing countries in Asia (e.g., Indonesia, Vietnam) and Africa. Speaking of which, Africa is one of the last great frontiers for international business. There are huge unmet market needs, young populations with growing incomes, impressive natural resources, and aggressive local firms to work with. This explains why companies as diverse as General Electric, French food giant Danone SA, and restaurant holding company Yum Brands have all made significant moves into African markets in recent years. To put this in perspective, Yum Brands’ CEO noted that “Africa wasn’t even on our radar screen 10 years ago, but now we see it exploding with opportunity.”⁸

Many multinational firms see developing countries as more than just sources of cheap labor or increasingly affluent markets. They also offer talented “frugal innovators”—people who can create on the cheap because of their extensive experience with local constraints (e.g., lack of access to capital or the latest technology). Especially attractive in developing countries are innovative home-grown products that are priced to match incomes of local citizens. For instance, in recent years Indian firms like Tata have been designing and selling $100 stoves and refrigerators. Established companies from developed nations have started paying attention, creating locally designed products for emerging markets (e.g., GE’s ultra-cheap ultrasound equipment).⁹

More than ever, developing countries are also producing world-class companies that are challenging their more established developed country brethren. For instance, how many Europeans and Americans would have recognized names like IT giant Infosys (India) or home appliance maker Haier (China) a decade ago? Today, these firms, and others like them, are giving more established companies such as U.S.-based IBM and Whirlpool a run for their money. In 2016, over 100 of the 500 biggest firms in the world were headquartered in China, a total second only to America’s. Compare that to 1997, when only one firm on the list of the world’s 500 biggest companies was headquartered in a developing country.¹⁰

International Challenges in Doing Business and Managing Talent

On top of facing a dynamic competitive environment when they venture abroad, companies also must cope with management challenges that are unique to international business. We will touch on these challenges in this section, including specific issues related to managing talent. On a broader level, however, international managers must be able to grasp foreign cultures and adapt their own behavior accordingly to be effective.¹¹

Emerging Market Complexity: The Case of China

Of course, this is easier said than done. Consider China, a complex place where business is driven by relationships based on mutual reciprocity and dispensing of favors (known as guanxi, pronounced “gwan-shee”) more than policies or laws. Establishing those relationships can be frustrating for impatient foreigners who would rather “get down to business” than spend time relationship-building to build trust with prospective Chinese partners. At the same time, China is changing rapidly, with younger workers becoming more individualistic, more willing to embrace risk and less dependent on networks of relationships.¹²

And that’s just for starters. Foreign firms in China face major regional differences in culture and languages as well as a host of competitors and a shifting regulatory environment that can prove frustrating. And while it is modernizing at an amazing rate, incomes in much of rural China are still too low to buy expensive electronics, cars, and homes. At the same time, the pace of competition in China is frenetic. Over 660,000 foreign companies were operating there in 2009—nearly double the number in 2000—plus millions of local firms. For instance, foreign consumer products companies may face thousands of small local competitors in a major city like Shanghai. Overall, economic power has been shifting China’s way. For more on this point, read the accompanying Culture Clash box.¹³

Culture Clash

The New Economic Center: Tilting East toward China

Interactions between the U.S. and China on economic issues have been prickly in recent years, with sniping back and forth about the value of China’s currency, trade imbalances, and so on. Especially interesting is how harshly Chinese officials sometimes react to economic comments made by their American counterparts (e.g., as “uncontrolled” and “irresponsible”). The harsher tone of Chinese officials may reflect China’s rising power and its pent-up resentment about the last 500 years of Western predominance. Flash back to Beijing half a millennium ago a...