Corporate Culture in Multinational Companies

A Japanese Perspective

V. Miroshnik, D. Basu

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137447647
• eBook ISBN: 9781137447661
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

This book explores the value component of corporate culture of companies and their relationship with production efficiency and personal values of the employee. The authors combine both qualitative analysis of the experiences of leaders of these organizations and the most advanced quantitative analysis regarding the corporate performances.

1

Introduction

The importance of the role of corporate culture in management systems can be evaluated at two levels, macro and micro. At the macro level, this book analyzes production systems from the viewpoint of corporate culture within the industry. The issue of corporate culture and its relationship with production efficiency is analyzed in 40 major companies in Japan, the core of Japan’s industrial sector. Henceforth in this book these 40 companies are called ‘the 40 Samurais’ to maintain confidentiality. At the micro level, the role of corporate culture is analyzed within two major companies; in this book these companies are called the ‘Shogun One’ and the ‘Shogun Two’.

The corporate strategy of a company determines its corporate culture. The major components of corporate culture are values. These values can influence the motivation of individual employees, which determines success or failure of the internal management system of the company. There are both micro and macro perspectives that affect this value-creation process. At the macro level, the production function is affected by not only the tangible elements of production but also by value creation process building corporate culture of the companies within the industry. At the micro level, the values creation process can be divided into three groups. First, the employees try to satisfy their own egos in the context of their ideology, whether they carry that ideology from their national culture or it from their own experience. Second, the employees try to improve their working and living environment (Foss & Lindenburg, 2013). Third, the employees care about the interest of the community of their coworkers. The third type of the value creation is at the highest level of cognition, which is already embodied in human psychology (Basu & Miroshnik, 1999). It creates cooperative tendencies, which needs to be cultivated in an appropriate environment by the development of corporate culture (Basu, Miroshnik, & Uchida, 2008; Dunbar, 2003; Sebanz, Bekkering, & Knoblich, 2006).

Employees gain self-respect if an organization demonstrates continuous progress. That may create a social environment that promotes harmony and long-term success for the organization. Many major Japanese companies have developed its own unique corporate culture, which has as its objective to create harmony and loyalty in workplaces through the process of injection of the essential values of the organization into its employees, whether within the country or within the worldwide network of subsidiary companies. The main purpose of this book is to examine this issue in the context of a number of Japanese companies in order to generalize the findings. The ‘Shogun One’ is a large multinational Japanese industrial vehicle firm, which is considered to be the leader both in Japan and in the world regarding its technology, reliability, and profitability. It is a relatively new company: about 70 years old. The ‘Shogun Two’ is a large multinational heavy industrial conglomerate and one of the oldest companies in Japan. The ‘40 Samurais’ are the most important Japanese companies, developed within the last 60 years. These represent the iron and steel, electrical and electronic, and automobile sectors. These companies together represent a cross-section of the Japanese industrial base. The human resources management efforts of the ‘Shoguns’ and the 40 Samurais have the aim to mold every employee into a company citizen irrespective of their background and nationality.

Corporate culture can play a crucial role in creating positive motivation, which can be considered as the one of indicators of the firm’s performance. Thus, the creation of an effective corporate culture plays a crucial role in the formation of the competitive strategy of these major companies in the international arena. The following chapters analyze the creation of corporate culture and its role in the Japanese companies.

The question of different types of control on the subsidiaries of a multinational company (MNC) is an important aspect of international management. Centralized multinational companies rely on the headquarters (HQ) of the parent company to make decisions for the subsidiary companies overseas. Decentralized multinational companies often have subsidiary companies responsible for making business decisions in their respective countries. However, centralized multinational companies can be very efficient regarding business decisions. The parent company develops the company’s mission and vision, and decides objectives for managers and employees to follow when pursuing these goals. Nevertheless, in a centralized company there can be negative effects of several layers of bureaucracy. On the other hand, a decentralized company also may have many personnel having different opinions on a particular business decision. Western companies are likely to have formal management systems, and strategic centers to exert control over their subsidiaries; for example, the top management in American companies encourages centralization, for the purpose of securing workforce commitment and retaining management control (Bartlett & Ghoshal 1998; Harzing 1999; Edwards & Edwards, 1979).

Subsidiaries can function within a hierarchy. Thus, the level of autonomy is formally decided by the headquarters, not ‘chosen’ by the subsidiary (Verbeke & Greidanus, 2012), and depends on the HQ strategy regarding resource allocation within the organization. Subsidiaries can provide service to specific parts of the MNC’s global markets (Foss & Pedersen, 2002). In centralized MNCs the technology is controlled by the HQ (Cantwell & Mudambi, 2005). These factors reduce the autonomy of subsidiaries. Low autonomy complicates daily operations, which may reduce entrepreneurial activities (Birkinshaw & Hood, 1998).

Gupta and Govindarajan (1991, 2000) formulated the type of control suitable for different subsidiary roles. In a subsidiary with low autonomy, the subsidiary has to share useful knowledge and information with the HQ. The advantage of such an arrangement is that it helps to reduce the uncertainty associated with strategic decisions and the distribution of resources within the MNC. Subsidiary’s strategic decisions are outcomes of a process of joint decision making or a decision made by one partner after consulting the others (Dörrenbächer & Gammelgaard, 2006). That may lead to conflicts and power struggles between subsidiaries and headquarters (Forsgren & Holm, 2012). It may also create a low level of autonomy for subsidiaries with regard to resolving conflicts.

High subsidiary autonomy can isolate those units from the rest of the organization (Noorderhaven & Harzing, 2009). Thus, flows of knowledge to and from high-autonomy subsidies are restricted (Monteiro, Arvidsson, & Birkinshaw, 2008). Highly autonomous subsidiaries may behave like a local company of the host country, like British subsidiaries in India, which are disconnected from other developments within these MNCs (Gnyawali & Hatfield, 2007).

According to Gupta and Govindarajan (1991), there are four generic subsidiary roles: Global Innovator (high outflow, low inflow), Integrated Player (high outflow, high inflow), Implementer (low outflow, high inflow) and Local Innovator (low outflow, low inflow). The Global Innovator (GI) subsidiary is a source of knowledge for other subsidiaries and sometimes to the parent unit. Integrated Players (IP) effect knowledge transfer to other parts of the MNC but at the same time receive knowledge from other parts of the MNC. Subsidiaries that are Implementers (IM) are dependent on the HQ or other subsidiaries for their knowledge. Local innovators (LI) are subsidiaries that create knowledge but do not transfer this knowledge to other subsidiaries. Knowledge flows depend on corporate culture and the nature of control that the parents exert on the subsidiaries.

Another type of control is social control, where the behavior of the subsidiary is affected by the values defined by HQ. Through socialization, the subsidiary is integrated into the organization (Nohria & Ghoshal, 1997). Socialization is most effective where there are close relationships between the HQ and subsidiaries. However, in those situations the subsidiary have influence on the decision-making process. In the high-autonomy subsidiary, the HQ normally increases the intensity of the supervision after performance of the subsidiary has worsened to turn it around (Anthony & Govindarajan, 2001).

Chandler and Hanks (1993) suggested that the use of subjective measures of firm performance is particularly useful in studying businesses, and that these measures correlate with objective measures with a high degree of reliability. Leadership is important in so far as the leaders motivate the employees to work according to the strategic aims of the company by creating an environment that fosters values to achieve the goals of the company. This type of leadership is called transformational leadership (Grant, 2012; Judge & Piccolo, 2004). When leaders work towards the creation of pro-social behaviors, they can inspire the employees to work towards the strategic goals of the company and in the process create values that can motivate the employees through corporate culture (Basu & Miroshnik, 1999; Lindenburg & Foss, 2011).

This book analyzes the subsidiaries of Japanese multinational companies in heavy industry, iron and steel, electronics, electrical and the industrial vehicle sector, mainly in Britain and Australia, with the understanding that an alignment of the values of the individual employees with the values of the organization creates a companywide citizenship, which can be seen as a source of competitive advantage.

In this book equal importance is given to both macro structures like institutions, rules, the role and structure of society, and micro elements like individuals’ preferences, beliefs, relationship with society, because interactions between individuals with the organization and between individuals themselves create lasting values that promote social behavior and ultimately enhance the long-term strategic efficiency of the organization.

2

Corporate Culture: Concepts and Issues

Corporate culture is defined as the behavior of the organization and its structure. It is rooted in an organization’s goals, strategies, and structure, and its approaches to labor, customers, investors, and the greater community. As such, corporate culture is an essential component of the organization.

The psychological view of corporate culture is a combination of ideas, habits, impulses, and way of life reflecting personal preferences. Research has shown that human beings develop a sense of self that is a combination of beliefs, feelings, and knowledge, which is used to evaluate, organize, and regulate their intellectual, emotional, and behavioral reactions to the physical and social environment (Meyer, Irving, & Allen, 1998; Lok, Westwood, & Crawford, 2005). The ‘self’ is constructed via experience, which is the primary means for humans to interpret and respond to external events.

Corporate culture encompasses basic assumptions and espoused values of the organization. It is a formal philosophy or mission of the organization, from which the behavior of the organization emerges. Corporate culture can be a strategy for the organization to achieve its goals. Values created over the years provide the foundation of ideas, expectations, ideals, boundaries of actions, and thought processes (Rokeach, 1973, 2000; Allaire & Firsirotu, 1984). In the global context, many companies must identify the DNA of their cultures. Similarly, as DNA of a living organism consist of genes, the DNA of a corporate culture consist of values. Agreeing on and strengthening the organization’s values is important so that employees across operations will better understand corporate goals and the acceptable ways of reaching them. Such alignment leads to better and more consistent business results.

Thus, values are the basis of corporate culture. At the top level there are patterns of behavior; at the secondary level values influence behavior; at the tertiary level, there are assumptions, beliefs, and perceptions that control behavior (Schein, 1968, 1984, 1992, 2010). According to Hofstede, corporate culture can be described as a combination of five values, which are individualism/collectivism, power distance, uncertainty avoidance, masculinity/femininity, and long-/short-term orientation (Hofstede & Bond, 1988) and the specific corporate culture of a company reflects the national culture of the country of establishment, which will have an overriding influence on the corporate culture of the company. In this book we are to examine this in the context of several multinational companies.

Thus, corporate culture can be characterized from the perspective of values because values are the core components of corporate culture (Miroshnik, 2013). Major values of corporate culture are innovation, stability, respect for people, outcome orientation, detail orientation, team orientation, and aggressiveness or determination (O’Reilly, Chatman, & Caldwell, 1991). These values are related to the four types of corporate culture: cooperative, competitive, passive, and aggressive (Cooke and Rousseau, 1988). These four types of corporate culture creates four organizational types with different styles of leadership, which are: (a) clan, (b) adhocracy, (c) hierarchy, and (d) market (Cameron & Quinn, 1999).

Competitive advantages of firms can be created by a number of instruments; organizational culture is the most importantone. Corporate culture in this book is perceived as the combination of three sub-systems from the perspective of its value components: (1) macro value system, (2) meso value system, and (3) micro value system. The first sub-system of culture, the macro value sub-system or ‘national culture,’ consists of the basic values (religious, moral, and habitual) that are common to a particular nation. The second sub-system of culture, the meso value sub-system or ‘organizational culture,’ embodies the myths, beliefs, and ideologies of the organization. Finally, the third sub-system of culture, the ‘micro value sub-system’ or ‘individual culture,’ comprises the values that belong to individuals within the organization, who contribute their unique experiences, beliefs, goals, and personalities.

Role of corporate culture

Corporate culture can affect performance, particularly if we consider performance in a non-material sense (Kotter & Heskett, 1992). Among the non-material or intangible factors affecting performance, motivation (as the root) and commitment (as the effectiveness) of employees have very high status. A company’s performance can be enhanced if the employees are highly motivated and committed (Campbell et al., 1970; Carmeli & Tishler, 2004; Cutcher-Gershenfeld, 1991). The work environment typically influences employees’ motivation and commitment. Thus, management systems must analyze the environment to create an appropriate corporate culture promoting desirable motivation and high commitment of workers.

Motivation is the set of forces that cause people to choose certain behaviors from among the many alternatives open to them. Motivation is important because of its significance as a determinant of performance. Motivation contributes to the overall working culture in an organization. The heart of the motivation process is goal setting. All consciously motivated behavior is goal-oriented, whether the goals are self-generated or assigned by others. Naturally occurring goals derive from the activation of basic human needs, personal values, personality traits, and self-efficacy perceptions shaped through experience and socialization. Individuals also set, or accept, goals in response to external incentives. The goals individuals choose can vary in difficulty and specificity, and these attributes, in combination with perceptions of self-efficacy, help determine the direction of behavior, the amount of effort exerted, the degree of persistence, and the likelihood that individuals will develop strategies to facilitate goal attainment. Corporate strategies may serve as the mechanisms by which goal choices and efficacy beliefs influence behavior (Locke & Latham, 1990, 2002). Humans are motivated by various needs, which exist in a hierarchical order. There are five general types of needs. These are, in ascending order: physiological needs, safety, belonging, social esteem, and self-actualization (Maslow, 1954). Expectancy theory of motivation proposed by Vroom suggests that motivation is based on how much we want something and how likely we think we are to get it (Vroom, 1964). When performance results in various extrinsic and intrinsic rewards, the individual evaluates the equity of these various rewards relative to the effort expended and the level of performance attained. The individual is satisfied if the rewards are relative to the effort expended and the level of performance attained. In other words, the individual is satisfied if the rewards are felt to be fair. Equity is an individual’s belief that he or she is being treated fairly relative to others.

Managers may influence motivation through the organization’s reward systems, or they may adopt specific interventions derived from one or more theories. The organization’s reward system is the basic structural mechanism that an organization uses to motivate workers. An organization’s primary purpose in giving rewards is to influence employee behavior. Organizational rewards can affect individual attitudes, behaviors, motivation, and intervention for enhancing motivation.

‘Work motivation is a set of energetic forces that originates both within as well as beyond an individual’s being, to initiate work-related behavior, and to determine its form, direction, intensity, and duration’ (Pinder, 1998). According to Locke (1997), the performance that results from these efforts affects the level of satisfaction experienced, which, along with motivation, can lead to other forms of action, a set of energizing forces that contributes to positive behavior. Motivation can be defined as the relative strength of an individual’s identification with and involvement in a particular organization (Mowday, Porter, & Steers, 1979, 1982a, b). Motivation is a psychological relationship between the employees and their organization, which would provoke employees’ attachment to the organization so that they will not leave voluntarily (Meyer & Allen, 1984: 17). Corporate culture is a major instrument in creating motivation. The question is: how do we know when the level of motivation desired by the corporate culture has been achieved? In this book we examine the proposition that if the value components of the prevailing corporate culture are similar to the values of the idealized vision of the corporate culture as perceived by the employees, we then would expect employees to be highly motivated and committed.

Corporate culture and person–organization fit

Motivation helps the firm to pursue strategic goals by discovering opport...

Table of contents

• Cover
• Title
• 1  Introduction
• 2  Corporate Culture: Concepts and Issues
• 3  The Management System of Japanese Companies: Macro and Micro Perspectives
• 4  The Role of Corporate Culture in Production Efficiency
• 5  Corporate Culture in the 40 Samurais
• 6  Corporate Culture in Shogun One
• 7  Corporate Culture in Shogun Two
• 8  International Transfer of Corporate Culture
• 9  Corporate Culture at the Highest Level: Governance
• 10  Corporate culture in the Japanese management model
• 11  Conclusion
• References
• Index