Problems and challenges

states that they do converge, but the process will be slow so that the related research findings can hold true and stay valid for a long period of time. There is the impact of modern

technology which cannot be ignored, neither the differences of ‘modern’ and ‘traditional’, individualism versus collectivism. In reality, the so-called modern culture is based on western values, despite the rich historical and value system of collectivist nations in Asia.

Migrations, ethnic group and subculture movements, numerous assimilations have directed our world to its recent complexity, where the borders of different cultures have even more complicated definitions. Ethnicity, as a belief based on habits and a sense of belonging to a specific group of people, with a matter of individualization have led to an interesting form where globalization accompanied by fragmentation and singularization, especially in regarding consumption (Firat, 1995)

2.3 Problems and challenges

For most of the enterprises, the cultural diversity of different markets often troubles the decision-making process, and so has a big effect on the overseas business results. Even if the managers’ make correct decisions, it does not necessarily guarantee the desired numbers.

How to communicate effectively with the local staff and implement business decisions of the managers abroad? How to choose the right employee who is capable to serve the company well overseas, but in the same time, doesn’t conflict the head quarter’s interests? How to use resources to ease and eliminate internal conflicts caused by different cultures during overseas operations? All these problems are the challenges that business enterprises must face.

Communication is the very first trial of international cooperation. If the participants cannot communicate, the cooperation is impossible. If they cannot cooperate effectively, the work is

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much more stress and energy than it supposed to be, consuming unnecessary corporate resources. One of the most obvious difficulties is the language barrier: when people due to their lack of language skill cannot express themselves properly or fail to understand something. But misinterpretation can happen even if the participants do speak the same language but due to their different communication styles. We differentiate high and low context communication, based on the anthropologist, Edward Hall’s work. In high context the primary purpose of communication is to form a relationship, while in low contest is to exchange information. In high context style there is much more meaning behind the words, if someone doesn’t aware of that can results big misunderstanding. Asian countries like China, Japan or India are usually communicating in high context, to the contrary to the low context of the Westerner countries. The main differences are highlighted in Table 1.

Table 1 High and Low Context Communication

Low Context communication High Context communication

Overt Message Covert Message

Plainly Coded Message Internalized Message

Focused on requirements High Commitment to long term relationship

Written agreements Spoken agreements

Punctuality Relaxed about time

Reaction on the surface Reaction Reserved

Source: Adapted from Hall

As culture varies in every country, economic systems, labor costs, and industrial relations systems also can be very different, therefore make the human resources manager’s work more complicated: this means selecting, training, and managing employees abroad. Sending employees abroad and managing human resources globally is a very complicated task,

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because of the different countries into which many firms are expanding now are not only the developed, industrialized, therefore more familiar surroundings anymore, but the so-called emerging financial markets of the world, such as India, Brazil or China. Besides that, every country has strict rules to regulate foreign enterprise operations within its borders: this could vary from special health insurance through working visa constraints to the question of economical stability.

There are some factors global management needs to be concerned about, because they have the biggest impact on foreign economies, thus on the success of businesses abroad. As long as managers are able to harmonize their company’s principles with the certain country’s economic environment, then they will be able to survive, make progress and keep on earning profits.

 The cultural factor is one of the most important part of this: norms and customs that are obvious in the domestic country can be considered rude or invalid in another cultural environment, which requires corresponding differences in practices too. The basic cultural norms of Eastern Asia and the importance of the patriarchal system not just affect a typical worker’s view of the relationship to an employer, but also has big influence on the quality of his work and mentality toward the company. Japanese workers have often come to expect lifetime employment in return for their loyalty.

As well, incentive plans in Japan tend to focus on the work group, while in the West the more usual method is still to focus on individual worker incentives. Such

intercountry cultural differences suggest the need for developing new human resources practices for the more successful adaption to local cultural norms. In

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addition, efficiency can be increased if the members and managers of human resources departments in a foreign subsidiary are the citizens of the host country, or individuals with equivalent knowledge about the local culture and customs. A high degree of sensitivity and empathy for the cultural and attitudinal demands of co-workers is always important when selecting employees to staff overseas operations.

There are 4 stages of gaining cultural understanding, as seen as Table 2, and the goal is to find a person who is aiming to achieve that.

Table 2 Stages of cultural understanding Stages of

cultural understanding

Definition Effect on businesspeople

Cultural ignorance

It exists when individuals have no knowledge of cultural differences

Businesspeople at this stage are liabilities to their

companies and may do more harm than good on overseas assignments.

Cultural awareness

It takes place when people know there are cultural differences and looking for them.

Businesspeople at this stage are less likely to commit social or cultural blunders.

Cultural knowledge

It is an extension of cultural awareness, when people know what are the

differences.

Businesspeople at this stage know how to offer

appropriate greetings and what behaviours to expect in foreign markets. They observe, catalog, analyse foreign behaviour and look for the reason behind them.

Cultural understanding

It occurs when individuals are aware of the behavioural and attitudinal subtleties of a culture and often fluent in the local language.

Businesspeople at this t stage not just know what

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As one expert puts it, “An HR staff member who shares the employee’s cultural background is more likely to be sensitive to the employee’s needs and expectations in the workplace—and is thus more likely to manage the company successfully.”

 Economic Factors. Differences in economic systems of countries can also lead to misunderstandings in human resource practices. In most cases the actual political practice is the will of the authority that determines what is desirable for the economy:

it could be decreasing unemployment rates in socialist systems, or big revenues that never stop growing in countries that settled to the capitalist ideas.

 Labour Cost Factors. High labour cost is a sign of increasing expenditures by the not enough efficient performance of human resources department. It is essential for the company’s future performance to regulate its expenses, thus having a clear idea of different labour costs and practices – such as overtime work and others – around the world is more than necessary. For example, workers in Taiwan average about 2144 hours of work annually, while this number in Hungary is average 1980 hours – one of the several norms and regulations an international enterprise need to know about while sending employees abroad.

 Industrial Relations Factors. Industrial relations, and specifically the relationship between the worker, the union, and the employer, vary significantly from country to country and have a large impact on human resources management practices. In Germany, for instance, employees have the right to vote and so express opinion regarding new company policies. On the other hand, in many countries, the way of communication is so rough that it is almost impossible for an average employee to

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contact a higher-ranked manager, and sometimes even the existence of worker unions is questionable.

There is another dilemma that employees abroad have to deal with, called repatriation.

Repatriation is the process of moving back to the parent company and country from the foreign assignment, means returning one’s family to familiar surroundings and old friends. It is very common to talk about fitting-in, and the problems of integration due to cultural differences; but the conflicts caused by the returning are often overlooked. Most of the repatriation problems are very common: changes in the company’s compensation policy can affect employee’s income planning in a long run, an extended foreign mission and constant lack of contact with the home staff can easily ruin working relationships or even the good communication with the parent firm’s leading managers after returning.

Besides these, there is a need for adaptive training to get back to the environment which used to be familiar, but after a foreign mission it might look different or even stranger.

Many repatriates are temporarily placed in makeshift jobs, as a common way of

problem-solving in human resources management circles. A country’s political, social or cultural life is not a constant variable, and if somebody leaves it for a relatively long period of time, it is another challenge to find a way back: the longer you stay out of sight, the harder it gets to act and see things like you did before, with other words, expatriates may undergo a sort of reverse culture shock. At last, there is the phenomenon of “cold thinking”: people who has lived abroad look at things home more objectively, as they see things from a further, thus less subjective, unbiased perspective.

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Even though international business and cross cultural management is a practice for a very long time, the theories and studies are just recently developed from researches and findings of international business (global manager), organizational behaviour (macro-, concept- and micro level of cross cultural management), human resource management, psychology and anthropology (cultural frameworks).

To define culture, I took Hofstede’s cultural programming framework as basis. It taught us that culture is not inherited, but shared amongst a society. Its core are the values we learnt during childhood, but later develops other layers, for example corporate culture. To examine and compare different cultures, Hofstede created a six dimension: power distance, uncertainty avoidance, masculinity, individualism, long term orientation and indulgence.

Although these can create a simplified picture of a culture, we have to avoid the stereotypes, even if some of them quite valid.

The international nature of the cross cultural management creates many challenges.

The communication, selection and training of the co-workers, internal conflicts and repatriation are all problems which the human resource and global managers have to face.

In the study of cross-cultural management, culture can be seen as a product, or as a process.

The following figure’s approaches are combined by most of the researchers of this topic.

There are four layers or dimensions: individuals versus groups, comparative versus

interactive. The first approach is the toolkit, targeting individuals while looking for values of personality. The second defines culture in a structural way, under the various environmental conditions, that are fixed and cannot be changed by actions, like climate or geography. The