Cross Cultural Management

Hofstede’s Cultural Dimension

CAGE Framework Pankaj Ghemawat
Culture and Leader effectiveness: The Globe Study
Hofstede’s Cultural Dimension
Cultures around the world are getting more and more
interconnected and the business world is becoming
increasingly global.
For managers this means that they should be able to work
with a large variety of people from different countries and
cultural backgrounds.
However, since most people are so strongly immersed in
their own culture, they often fail to see how it affects their
patterns of thinking or their behavior.
 Cultural norms play a large part in interpersonal relationships at
work. When you grow up in a certain culture, you take the
behavioral norms of your society for granted, and you don't have to
think about your reactions, preferences and feelings, provided that
you don't deviate too much from the central tendency in your
society.
 However, when you step into a foreign culture, things suddenly
seem different, and you don't want to cause offense. By using
Hofstede's Cultural Dimensions as a starting point, you can evaluate
your approach, your decisions, and your actions, based on a general
sense of how people in a particular society might think and react.
 This model can be used to make the unknown less intimidating,
avoid making mistakes, and to provide a much-needed confidence
boost when you're working in an unfamiliar country.
The Geert Hofstede model describes the relationship
between culture, society, and individuals.
This model was originally developed during the 1960s and
1970s, after Hofstede interviewed IBM employees
scattered around the globe.
Since its creation, this model has been used in a wide range
of fields, including business.
 The Geert Hofstede model – Hofstede’s theories of cultural
dimensions – describes six dimensions that paint a “big
picture” of cultural values across the globe.
 Understanding this model can help business professionals at
any level become better communicators and better understand
their peers’ behaviors and attitudes.
 In turn, that understanding can lead to fewer communication
problems and better working relationships.
 Since this model offers insight into people’s cultural values, it
can significantly benefit anyone involved in cross-cultural
communication – and, since today’s workplace is so diverse,
it can be beneficial for managers and business leaders as well,
regardless of where they are working.
Once the model was refined, it embraced six
categories that define national culture:
 Power distance
 Individualism-collectivism
 Masculinity-femininity
 Uncertainty avoidance
 Long-term orientation
 Indulgence [Link]
 Power Distance
 This refers to the degree of inequality that exists – and is accepted
– between people with and without power.
 A high PDI score indicates that a society accepts an unequal,
hierarchical distribution of power, and that people understand
"their place" in the system.
 A low PDI score means that power is shared and is widely
dispersed, and that society members do not accept situations
where power is distributed unequally.
Application:
According to the model, in a high PDI country, such as Malaysia
(100), team members will not initiate any action, and they like to be
guided and directed to complete a task. If a manager doesn't take
charge, they may think that the task isn't important.
 Individualism Versus Collectivism

 This refers to the strength of the ties that people have to others within
their community.
 A high IDV score indicates weak interpersonal connection among
those who are not part of a core "family." Here, people take less
responsibility for others' actions and outcomes.
 In a collectivist society, however, people are supposed to be loyal to
the group to which they belong, and, in exchange, the group will
defend their interests. The group itself is normally larger, and people
take responsibility for one another's well-being.
Application:
Countries like Panama and Gautemala have very low IDV scores (11 and
six, respectively). In these countries, a marketing campaign that
emphasizes benefits to the community would likely be understood and
well received, as long as the people addressed feel part of the same
group.
 Masculinity Versus Femininity
This refers to the distribution of roles between men
and women. In masculine societies, men are
expected to behave assertively. Demonstrating your
success, and being strong and fast, are seen as
positive characteristics.
In feminine societies, greater importance is placed
on good relationships with your direct supervisors,
or working with people who cooperate well with
one another.
…..Masculinity Versus Femininity
Application:
 Japan has the highest MAS score of 95, whereas Sweden has the
lowest measured value of five. Therefore, if you open an office in
Japan, you should recognize you are operating in a hierarchical,
deferential and traditionally patriarchal society. Long hours are the
norm, and this, in turn, can make it harder for female team members
to gain advancement, due to family commitments.
 At the same time, Japan is a culture where all children (male and
female) learn the value of competition and winning as part of a team
from a young age. Therefore, female team members are just as likely
to display these notionally masculine traits as their male colleagues.
 By comparison, Sweden is a very feminine society, according to
Hofstede's model. Here, people focus on managing through
discussion, consensus, compromise, and negotiation.
 Uncertainty Avoidance

This dimension describes how well people can cope with anxiety.
 In societies that score highly for Uncertainty Avoidance, people attempt to make
life as predictable and controllable as possible. If they find that they can't control
their own lives, they may be tempted to stop trying. These people may refer to
"mañana," or put their fate "in the hands of God."
 People in low UAI-scoring countries are more relaxed, open or inclusive.
 They have in mind that avoiding uncertainty is not necessarily the same as
avoiding risk. Hofstede argues that you may find people in high-scoring countries
who are prepared to engage in risky behavior, precisely because it reduces
ambiguities, or in order to avoid failure.
Application:
In Hofstede's model,Greece tops the UAI scale with 100, while Singapore scores the
lowest with eight.
Therefore, during a meeting in Greece, you might be keen to generate discussion,
because you recognize that there's a cultural tendency for team members to make the
safest, most conservative decisions, despite any emotional outbursts. Your aim is to
encourage them to become more open to different ideas and approaches, but it may be
helpful to provide a relatively limited, structured set of options or solutions.
Long- Versus Short-Term Orientation
 This dimension was originally described as "Pragmatic
Versus Normative (PRA)."
 It refers to the time horizon people in a society display.
Countries with a long-term orientation tend to be pragmatic,
modest, and more thrifty.
 In short-term oriented countries, people tend to place more
emphasis on principles, consistency and truth, and are
typically religious and nationalistic.
Application:
The U.S. has a short-term orientation. This is reflected in the
importance of short-term gains and quick results (profit and loss
statements are quarterly, for example). It is also reflected in the
country's strong sense of nationalism and social standards.
 Indulgence Versus Restraint (IVR)

Countries with a high IVR score allow or encourage relatively free

gratification of people's own drives and emotions, such as enjoying
life and having fun. In a society with a low IVR score, there is
more emphasis on suppressing gratification and more regulation of
people's conduct and behavior, and there are stricter social norms.
Application:
According to the model, Eastern European countries,
including Russia , have a low IVR score. Hofstede argues
that these countries are characterized by a restrained
culture, where there is a tendency towards pessimism.
People put little emphasis on leisure time and, as the title
suggests, people try to restrain themselves to a high
degree.
 In a business context, managers and leaders can use this model to:

 Communicate more effectively with their employees.

can help managers reduce miscommunications and
workplace friction, while also improving teamwork and
camaraderie.
 Better understand employees’ behavior. Culture not only
determines how people communicate, it also
impacts employee productivity, their actions, their behavior,
their social conduct, and more. Geert Hofstede model can
shed light on certain types of behavior and, in consequence,
reduce miscommunications.
 Gain insight into the interplay between organizational
culture and structure. the way people interact with
supervisors and business leaders
 Improve the performance of organizational change
initiatives. for instance, whether they resist change or engage
with change initiatives.
 Develop ideas for improving the organization. Understanding
the Geert Hofstede model can help managers identify problems
within the organization that stem from cultural issues. They can
design performance improvement initiatives, such as
communication strategies designed to minimize conflict.
 Work more effectively in international settings. Business
professionals who work in international offices are often faced
with new cultural environments. In many cases, the differences
can be challenging and can result in miscommunication, friction,
and so on. This model can help illuminate the values of a culture
and, as a result, help professionals learn to work in different
cultures more successfully.
CAGE Framework by Pankaj Ghumawat
 The CAGE Distance Framework is a Tool that helps Companies
adapt their Corporate Strategy or Business Model to other Regions.
 When a Company goes Global, it must be aware that, what works
in one country may not work in another.
 This Framework studies the factors that characterize countries to
maximize the possibilities for Companies to go Global.
 These Factors are called “Distances”, referring to what separates
two different countries.
 Its name in an acronym for the 4 Distances it focuses on to do so:
Cultural.
Administrative.
Geographic.
Economic.
The 4 distances of CAGE Framework
Cultural: What characterizes the Culture of the
Country.
For example:
Language.
Religion.
Values.
Administrative: How the Administration of the
Country works.
For example:
Bureaucracy levels.
If it is a Centralized or a De-centralized Country.
What Requirements must be met to operate.
Geographical: What characterizes the Geography of
the Country.
For example:
The Size of the Country.
The Weather.
 Economic: How is the Economy of the Country.
For example:
Its Economic Model.
The Growth Rate.
Its GDP
 How to use the CAGE Framework effectively?

 Focus on the biggest Differences.

 Don’t spend a lot of time on the similarities.
 Don’t be soft when analyzing a Country.
 Don’t underestimate Values and Beliefs.
 Hire or Partner with locals, and listen to them.
 Example
The all-powerful Starbucks failed miserably to
expand its business in Australia.

Why?

Use CAGE Framework to identify the reasons

 The company assumed that since the US and
Australia have similar culture and
history, Starbucks could operate in the same way.
They tried to grow fast and failed.
CAGE Framework to find out what Starbucks
should have considered in its Business Model
 Cultural Dimension

 Australians don’t like the same kind of coffee as

Americans.
 American coffee is too sweet for them.
 Australians are used to the coffee introduced by
Greeks and Italians in the mid-1990s.
 Administrative Dimension

 Maybe, the Australian

administration and specially the banks (if we
consider them part of the Administration) are not
used to doing Business in the red (losing
money).
 On the US, credit is much more accesible.
 This is probably the reason why the Australian
Starbucks had to be financed from the US.
 Geographic Dimension

 This is also an hypothesis, but

perhaps Australia’s size and its disperse
population contributed to a lack of momentum in
its popularity.
 Australia has most of its population scattered in
a few large cities.
 Economic Dimension

 Starbucks coffee was too expensive for

Australians.
 In comparison, they charged much more than
local cafes.
Culture and Leader Effectiveness
The GLOBE Study
 The "Global Leadership and Organizational Behavior
Effectiveness" (GLOBE) Research Program was
conceived in 1991 by Robert J. House of the Wharton
School of Business, University of Pennsylvania.
 GLOBE's major finding is that leader effectiveness is
contextual, that is, it is embedded in the societal and
organizational norms, values, and beliefs of the people
being led.
 GLOBE empirically established nine cultural
dimensions that make it possible to capture the
similarities and/or differences in norms, values, beliefs –
and practices—among societies.
 Power Distance: The degree to which members of a collective
expect power to be distributed equally.
 Uncertainty Avoidance: The extent to which a society,
organization, or group relies on social norms, rules, and
procedures to alleviate unpredictability of future events.
 Humane Orientation: The degree to which a collective
encourages and rewards individuals for being fair, altruistic,
generous, caring, and kind to others.
 Collectivism I: (Institutional) The degree to which organizational
and societal institutional practices encourage and reward
collective distribution of resources and collective action.
 Collectivism II: (In-Group) The degree to which individuals
express pride, loyalty, and cohesiveness in their organizations or
families.
 Assertiveness: The degree to which individuals are
assertive, confrontational, and aggressive in their
relationships with others.
 Gender Egalitarianism: The degree to which a collective
minimizes gender inequality
 Future Orientation: The extent to which individuals
engage in future-oriented behaviors such as delaying
gratification, planning, and investing in the future.
 Performance Orientation: The degree to which a
collective encourages and rewards group members for
performance improvement and excellence.
 GLOBE next analyzed the responses of the 17,300
middle managers from 61 of the 62 countries to identify
leader characteristics, such as modest, decisive,
autonomous, and trustworthy, based on the following
definition of leadership:
“An outstanding leader is a person in an organization or
industry who is "exceptionally skilled at motivating,
influencing, or enabling you, others, or groups to
contribute to the success of the organization or task."
 The analysis generated 21 leadership scales. These 21
leadership scales were statistically and conceptually
reduced to six scales, resulting in six leader styles
 Six Leadership Styles
 The performance-oriented style (called
"charismatic/value-based" by GLOBE) stresses high
standards, decisiveness, and innovation; seeks to inspire
people around a vision; creates a passion among them to
perform; and does so by firmly holding on to core values.
 The team-oriented style instills pride, loyalty, and
collaboration among organizational members; and highly
values team cohesiveness and a common purpose or
goals.
 The participative style encourages input from others in
decision-making and implementation; and emphasizes
delegation and equality.
 ………Six Leadership Styles
 The humane style stresses compassion and
generosity; and it is patient, supportive, and
concerned with the well-being of others.
 The autonomous style is characterized by an
independent, individualistic, and self-centric
approach to leadership.
 The self-protective (and group-protective) style
emphasizes procedural, status-conscious, and
'face-saving' behaviours; and focuses on the safety
and security of the individual and the group.
Thanks