The impact of culture in International Business: an application of the Hofstede s Model

Transcription

1 LIBERA UNIVERSTÀ INTERNAZIONALE DEGLI STUDI SOCIALI LUISS GUIDO CARLI Dipartimento di Impresa e Management Cattedra di International Business Corso di Laurea in General Management The impact of culture in International Business: an application of the Hofstede s Model RELATORE CHIARISSIMO PROF. MATTEO DE ANGELIS LAUREANDO LORENZO LANARO DE VITO MATR CORRELATORE CHIARISSIMO PROF. SIMONE MORI ANNO ACCADEMICO

2 You can never cross the ocean until you have the courage to lose sight of the shore. Christopher Columbus To my family and friends, for the kindness and support given. A special feeling of gratitude goes to my parents Angelo and Liliana for all the sacrifices done throughout their life in order to grant me the best education possible, and my brother Claudio for the good advices given when making important choices.

3 Summary Introduction... 6 First Chapter. Culture of a population What is Anthropology? Brief history of culture definition Classical Anthropology From Classical Anthropology to Social Evolutionism From Social Evolutionism to Modern Ethnography through Historicism s: Hofstede s Definition of culture Culture as the share of something among a group of people Introduction of Personality in the Anthropology field of study Anthropology applied to Social Sciences & Hofstede s definition of culture Introducing Personality in the definition of culture Hofstede on culture manifestation Nowadays Schein s definition of culture Other considerations Power Distance (PDI) Individualism (IDV) Masculinity versus Femininity Uncertainty Avoidance Pragmatic versus Normative (PRA) Indulgence versus Restraint (IND) Criticisms and approvals to the Hofstede s model Arguments against the model Arguments in support of the model... 55

4 Second Chapter. The Hofstede s Model administered to ENEL S employees Introducing ENEL ENEL History Enel Green Power ENEL S.p.a. presence in the world The Hofstede s Model administered to ENEL s employee Presenting the Sample Power Distance Index (PDI) Individualism vs. Collectivism (IDV) Masculinity vs. Feminity (MAS) Uncertainty Avoidance Index (UAI) Pragmatic vs. Normative (PRA) (ex Long Term Orientation vs. Short Term Orientation - LTO) Indulgence vs. Restraint (IND) Results overview Third Chapter. ENEL s and Hofstede s IBM results comparison Hofstede s results Power Distance Index comparison Individualism vs. Collectivism dimension comparison Masculinity vs. Femininity dimension Comparison Pragmatic vs. Normative dimension comparison Indulgence vs. Restraint dimension comparison Overview Conclusions References Appendix 1. Values Survey Module 2013 (VSM) Appendix 2. VSM 2013 answers data Appendix 3. Calculations

5

6 Introduction Managing culture within a firm is becoming one of the most important pillars of management, especially when taking into consideration to expand the firm s boundaries. This is due to the fact that different countries have different values and norms. More and more companies are starting to look abroad in order to expand their businesses as the world increasingly becomes interconnected so as to achieve economies of scale and scope, increase revenues and take advantages from the so-called spill-over effect, an effect that increases the knowledge of a company that can arise from agglomeration. As a consequence, managing culture has become one of the largest challenges for international business. Culture can influence the business in different ways: from language to pricing, from different values and customs to differences in religion beliefs and holy days. Understanding different cultures is important in order to take advantages from these differences, but this kind of study is not easy. One of the most important issues when dealing with this subject is to give a definition of culture. Since numbers of authors have given many definitions, an overview will be presented throughout the following chapters, focusing on the Hofstede s one that is, in my opinion, the best definition available in the literature. This last definition may appear general and complicated but it will be threaten in a way that will clarify any doubt. An overview of anthropology will provide the reader the necessary elements in order to have a good picture in mind of what this thesis is about and what kind of objective I want to achieve through it. The dissertation will present the points of view of different authors, from Lewis Henry Morgan founder of anthropology to Bronisław Malinowski the father of the modern ethnography through Edward Burnett Tylor that gave the first definition of culture in his publication Primitive Culture in 1871 and other important schools of thought of important authors like J.G. von Herder, Franz Boas, Edgar Henry Schein and 6

7 David C. Funder will be quoted to understand the whole anthropologic theoretical framework: from classical anthropology to modern ethnography. In this way, the change in the research methods will be clear, giving to the reader the possibility to understand the influence that these authors had on Geert Hofstede s research, a research that ended up with a model thanks to which it s possible to make a cultural overview, at least on a firm-level. Once the concept of culture will be clear to the reader, I will introduce this model: a model that, as said, explains the general traits of a national culture focusing on six dimensions: 1. Power Distance Index (PDI) 2. Individualism vs. Collectivism (IDV) 3. Masculinity vs. Femininity (MAS) 4. Uncertainty Avoidance Index (UAI) 5. Pragmatic vs. Normative (PRA) ex Long Term Orientation vs. Short Term Orientation (LTO) 6. Indulgence vs. Restraint (IND) These dimensions will be described, providing the reader the appropriate knowledge to understand the results obtained by Hofstede between 1967 and 1973 and the results that I ve obtained through a survey offered by the Hofstede Centre on an ENEL s employee sample, that I kindly over-please for willingness. Before showing the results, the sample will be presented together with the tools and formulas used for valuating dimensions in order to give an idea about the accuracy of this research. This thesis has the objective of validating this innovative model, at least on a local/firm-specific level. The model, in fact, is one of the most criticized for the assumptions made by the Author. In fact, the main conjecture around which the academic debate revolves is the assumption that there is a one-to-one relationship between the results obtained surveying a sample of employees and the entire population of the related country. 7

8 The author analyzed a large database of employee value scores collected within IBM, assuming that these results can give an overview of an entire country. This is one of the reasons why I decided to conduct this research; in other terms, I wanted to find out if the results in another firm are the same, or at least closer. Moreover, Hofstede did not conduct the same research in other firms, allowing critics to say that these results cannot represent a Country culture. Furthermore, I ll give an International Business and Management literacy overview: the results of other researchers like M.L. Jones and M. Søndergard will be mentioned to find out for what extents the model has been discredited and validated. Thus, the reader will be able to take a stand in the debate with his/her own ideas and point of view. Another important characteristics is that culture continuously evolves, so the Hofstede s results can in a certain way expire over time. It s important to say that I personally think that, without taking into account ENEL results on this survey, the mechanism of evaluating employee s culture within a firm applying the Hofstede s model, is at least an important starting point when deciding to enter in a new Country or even to understand how the employees feel within a firm or a simple teamwork. Thus, the Hofstede s model can be used by Human Resources Managers when recruiting or also by Marketing managers in order to make a marketing mix that fits a certain country population. Before giving the survey results, ENEL S.p.a. will be presented and some history will be given in order to understand the reasons why I choose this firm as sample target. As will be possible to see even through describing pictures provided by the company, ENEL is one of the most important MNEs in the world, 9 th MNE for FDI 1 and 73 rd for TNI 2, 3, and this is one of the reasons for sure. The last chapter will show a comparison between IBM s results (Hofstede 1967, 1973) and ENEL s results, ending up with my conclusions and suggestions for the future expanding projects. 1 Foreign Direct Investments 2 Source: UNCTAD, TNI, the Trans Nationality Index, is calculated as the average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment. 8

9 Management actually doesn t give the proper importance to this aspect; my purpose is to let the reader understand that cultural issues have to be the core of an international project, and the tool presented in this thesis can be very useful to this extent. 9

10

11 First Chapter. Culture of a population 1.1. What is Anthropology? When dealing with culture, the first step is to analyze what it means. Anthropology is the study of humankind that tries to give a definition to the entire set of complex behaviors of a population; in other terms, Anthropology is the study of the entire set of characteristics that describe the humankind. To this extent, since the humankind has numbers of aspects that can be studied, four fields have been outlined by Franz Boas in the 20 th century: biological or physical anthropology, social or cultural anthropology, archaeology and anthropological linguistics. Biological anthropology is the field that focuses on the study of humans and nonhuman primates in their biological, evolutionary, and demographic dimensions. Biologic Anthropologists examines the biological and social factors that have affected the evolution of humans and other primates. Archeology (or Archeological anthropology) is the study of the human past through its material remains. Archeologists studying artifacts, faunal remains, and human altered landscapes, understand patterns of past human behavior and cultural practices. Anthropological linguistics is that field in which the linguistic anthropologists pursues to comprehend the developments of human communications, verbal and nonverbal, differences in language throughout time and space, the common uses of language, and the connections between language and culture. Sociocultural anthropology can be divided in two subfields even if they tend to overlap: Cultural Anthropology and Social anthropology. Cultural anthropology is the comparative study of the multiple ways in which people add up the world around them, while social anthropology is the study of the interactions among persons and groups. Sociocultural anthropology is the spark of this thesis since the professor Geert Hofstede is listed in this field. It is important to say that this clear picture of Anthropology composition has been made not so long ago, then all the historical part that will follow has to be taken into 11

12 account as Anthropology history but it will be possible to see how a sort of specialization has occurred as getting closer to the present day, giving the impression that anthropology has evolved from the study of the humankind to the study of particular traits of it. The most important aspect of Anthropology in all its fields is the definition of culture. Numbers of authors tried to give a definition and, sometimes, these definitions have been accepted becoming part of the anthropology doctrine. But definition of culture is changed over time, probably because one of the characteristics of culture is that it isn t static but it changes due to external pressures such as technology, easiness of movement across borders, economical structure changes and so on. In my opinion it is important to understand how the concept of culture is changed over time, in order to comprehend the currently most accepted definitions Brief history of culture definition Classical Anthropology The first time that culture has been used in a non-agricultural way was by the Roman orator Cicero: cultura animi that means cultivation of the soul. In this definition, culture is identified with the philosophy, and its function becomes the one to lead men from a wild life to a civilian life, i.e. a life that is a truly human-social life, based on being part of a community. Notion of culture thus tends to be expressed through terms such as humanitas, and in that value will be accepted in the Middle Ages where, however, assumes a specifically religious meaning finding an institutional structure in the organization of knowledge. Humanism marks a recovery of the typical meaning that the notion of culture, interpreted as the formation of a man, possessed in antiquity. No longer the contemplation of God for the eternal salvation, but life in the world, within the community and its laws, is the purpose for which education must aim. 12

13 In the age of Enlightenment, the concept of culture strips of the aristocratic character still retained in the modern age; in the definition of culture is now included for the first time not only the modern science of nature, but also the mechanical arts bearers of progress technician. The culture definition thus tends to coincide with the whole of the knowledge acquired by mankind, which must be passed on from one generation to the next and augmented through the use of rational powers of man From Classical Anthropology to Social Evolutionism In the second half of the 18 th century, culture definition takes a decisive turning point, a breakthrough represented mainly by the transition from a subjective to an objective meaning of culture. It is still considered, not infrequently, as a process of formation, but this process no longer refers to an individual intellectual heritage, but at an intellectual heritage of a community or even the whole humanity. Hence, J.G. von Herder conceives culture as a process that involves the whole human race, which is separated from its natural origin and is trained progressively, following a providential plan that is implemented through the transition from one community to another 4 (Herder). Two important authors are also the American Lewis Henry Morgan and the English Edward Burnett Tylor, who lived in the 19 th century. The first author is seen as the founder of anthropology since he outlined the connections between material culture and social structure, giving one of the pillars of anthropology: culture changes over time. The latter gave the first definition of culture: Culture, or civilization, taken in its broad, ethnographic sense, is that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society 5. (Morgan) 4 J.G. von Herder, Ideen zur philosophie der Geschichte der Menschheit, L.H. Morgan, Ancient Society, 1871, 13

14 Morgan and Tylor became important pillars of Anthropology thanks to their points of view on the reasons why there were that abnormal difference among Europeancivilized populations and American-primitive colonies. Cultural evolution anthropology s first systematic ethnological theory was intended to help explain this diversity among the peoples of the world. The mentioned authors have developed rival schemes of overall social and cultural progress, as well as the origins of different institutions such as religion, marriage, and the family. Tylor emphasized that culture evolved from the simple to the complex, and that all societies passed through the three basic stages of development suggested by Montesquieu: from savagery through barbarism to civilization, stating that progress was possible for all. The difference between European and new colonial communities led Tylor to affirm that they were in different stages of evolution. In this way, Tylor affirmed that the neocolonial communities were in an earlier stage of evolution, a stage that European communities had already passed. Finally, Tylor expressed an idea that is still valid nowadays: cultural traits can diffuse from one society to another, simply making the two society to be in contact for a lapse of time sufficient to understand each others culture. This can even lead to a new completely different culture: some form of cultural mix resulting in shared values and customs between the two communities. As we will see further - even nowadays - communities can accept and include in their culture some values belonging to another community, without changing their customs From Social Evolutionism to Modern Ethnography through Historicism A crucial turning point was the passage from classical anthropology to modern ethnography happened at the end of 19 th century. The fathers of this train of thought were Franz Boas ( ) and Bronisław Malinowski ( ), whose main disagreement with the evolutionists involved their assumption that universal laws governed all human culture. 14

15 Boas argued that it is fundamental to study the history of every single culture in order to completely understand the reasons why cultures were different among communities for this reason his tendency was named Historicism by scholars. In fact, as quoted by Marvin Harris, a modern anthropologist, Boas said that: If we want to make progress on the desired line, we must insist upon critical methods, based not on generalities but on each individual case. In many cases the final decision will be on dependent origin in others in favor of dissemination 6. (Harris) Then, Malinowski, influenced mainly by his predecessors Boas and Tylor, in his most important publication gave a different notion of culture: Culture, comprises inherited artifacts, goods, technical processes, ideas, habits and values 7. (Malinowski) With this definition, the Author expanded the organic aspect of Tylor s theory since he argued that every single component contribute to the whole system. This kind of approach is similar to the Hofstede s one since his model made possible to have an overview of the society by studying on a part of it. The figure of speech synecdoche could be used to understand this approach: a term for a part of something refers to the whole of something s: Hofstede s Definition of culture Hofstede s first definition of culture is given in one of his first publications: Culture to me is the collective programming of the mind which distinguishes one group or category of people from another. [ ] Culture is a construct, that means it is not directly 6 M. Harris, The Rise of Anthropological Theory: A Histories of Theories of Culture, B. Malinowski, A scientific theory of culture,

16 accessible to observation but inferable from verbal statements and other behaviors and useful in predicting still other observable and measurable verbal and non verbal behavior. It should not be reified; it is an auxiliary concept that should be used as long as it proves useful but bypassed where we can predict behaviors without it. 8 (Hofstede, The Organizational Behavior Reader) In this statement, Hofstede gives the idea that culture is something shared among groups of people but, at the same time, he warns about the fact that we shouldn t take it into account as something concrete but he implicitly says that we should always study the person with whom we re getting in touch since he or she can, in a way, disassociate from the common values of the community in which he or she lives. In a certain way, I interpret this definition as a shield to his studies. Hofstede depicted pictures of 76 countries over time, giving different values for five cultural dimensions as a result of a survey hand out on a large number of IBM employees. In my opinion, with this definition of culture Hofstede implicitly says: don t take my results as a matter of fact, but study each situation. Is for this reason that Hofstede s studies have to be taken into account as an instrument, not as a perfect result. The scores should be verified by remaking the survey on the specific group of people on which we re interested in. Hofstede values can give a general idea, but if a company need specific and punctual results, managers should use the survey as a tool to understand how to manage or change his know how in order to best fit a new target community. This is the aim of this thesis: highlight the importance of studying a new market community on which a company wishes to invest in by using the tool invented by Geert Hofstede. 8 J.S. Osland, D.A. Kolb, I.M. Rubin, The Organizational Behavior Reader,

17 1.4. Culture as the share of something among a group of people. As observed by Edgar Henry Schein, former professor at the MIT Sloan School of Management, culture definition has always been associated with the share of something i.e. values, behaviors, habits and so on in a community. Since the Author has done a summary of the various categories used to describe culture, this summary is reported in the following Exhibit in order to give a better representation of the most valuable definitions of culture. Exhibit 1. Various Categories Used to Describe Culture 9 (Schein) Observed behavioral regularities when people interact: the language they use, the customs and traditions that evolve, and the rituals they employ in a wide variety of situations (Goffman, 1959, 1967; Jones, Moore, and Snyder, 1988; Trice and Beyer, 1993, 1985; Van Maanen, 1979b). Group norms: the implicit standards and values that evolve in working groups, such as the particular norm of a fair day s work for a fair day s pay that evolved among workers in the Bank Wiring Room in the Hawthorne studies (Homans, 1950; Kilmann and Saxton, Espoused values: the articulated, publicly announced principles and values that the group claims to be trying to achieve, such as product quality or price leadership (Deal and Kennedy, 1982, 1999). Formal philosophy: the broad policies and ideological principles that guide a group s actions toward stockholders, employees, customers, and other stake- holders, such as the highly publicized HP Way of Hewlett-Packard (Ouchi, 1981; Pascale and Athos,1981; Packard, 1995). Rules of the game: the implicit, unwritten rules for getting along in the organization; the ropes that a newcomer must learn in order to become an accepted member; the way we do things around here (Schein, 1968, 1978; Van Maanen, 1979a, 1979b; Ritti 9 Edgar H. Schein, Organizational Culture and Leadership,

18 and Funkhouser, 1987). Climate: the feeling that is conveyed in a group by the physical layout and the way in which members of the organization interact with each other, with customers, or other outsiders (Ashkanasy, Wilderom, and Peterson, 2000; Schneider, 1990; Tagiuri and Litwin, 1968). Embedded skills: the special competencies displayed by group members in accomplishing certain tasks, the ability to make certain things that gets passed on from generation to generation without necessarily being articulated in writ- ing (Argyris and Schön, 1978; Cook and Yanow, 1993; Henderson and Clark, 1990; Peters and Waterman, 1982). Habits of thinking, mental models, and linguistic paradigms: the shared cognitive frames that guide the perceptions, thought, and language used by the members of a group and taught to new members in the early socialization process (Douglas, 1986; Hofstede, 2001; Van Maanen, 1979b; Senge and others, 1994). Shared meanings: the emergent understandings created by group members as they interact with each other (as in Geertz, 1973; Smircich, 1983; Van Maanen and Barley, 1984; Weick, 1995). Root metaphors or integrating symbols: the ways in which groups evolve to characterize themselves, which may or may not be appreciated consciously but become embodied in buildings, office layout, and other material artifacts of the group. This level of the culture reflects the emotional and aesthetic response of members as contrasted with the cognitive or evaluative response (as in Gagliardi, 1990; Hatch, 1990; Pondy, Frost, Morgan, and Dandridge, 1983; Schultz, 1995). Formal rituals and celebrations: the ways in which a group celebrates key events that reflect important values or important passages by members, such as promotion, completion of important projects, and milestones (as in Deal and Kennedy, 1982, 1999; Trice and Beyer, 1993). 18

19 1.5. Introduction of Personality in the Anthropology field of study. David C. Funder (1979 still alive) has made an important step forward for the Anthropology field of study since he gave a significant definition of Personality that has been taken into account by Hofstede in his studies. Personality is a configuration of cognitions, emotions and habits. As stated by Funder, personality is: An individual s characteristic pattern of thought, emotion, and behavior, together with the psychological mechanisms hidden or not behind those patterns 10 (Funder) When Hofstede was dealing with culture, he has taken this definition into account and broadened it thanks to its Five-Factor Model, which divided the many descriptive personality words into five categories that will be presented further Anthropology applied to Social Sciences & Hofstede s definition of culture. What has been said above was the anthropological background or at least the most relevant - that a Dutch social psychologist and anthropologist had when He was approaching to this field and an idea of how he has impacted the doctrine. This anthropologist, pioneer of the application of cultural issues in social sciences, is Geert Hofstede and he has been influenced by this set of definitions, pillars of the classical and modern anthropology. The application of cultural issues in social sciences was moved by the fact that there have been international companies able to succeed in foreign countries and others that failed in dealing with different markets and communities. Studying cultures began the first phase when deciding to invest in a foreign country, because evidences gave the 10 D. C. Funder, The Personality Puzzle,

20 possibility to affirm that a lack of assumptions made on a foreign country culture can lead both to inefficiencies in terms of employees and customers. Is for this reason that anthropology has entered in many fields, including economics and international business. Geert Hofstede, as said, is a Dutch social psychologist and anthropologist. He s entered in the socio-cultural and economic literary thanks to his studies on crosscultural groups, used to develop the cultural dimensions theory. He had published numbers of books, in which he expresses its point of view on culture. Numbers of researchers quote him in their studies since his point of view on and definition of culture is both easy to understand and sharable Introducing Personality in the definition of culture Hofstede is one of the few researchers that had introduced personality in the definition of culture. In fact, as can be understood on his publications, there are some values that are the same for everybody, but every single person, when growing, develops some values that can be slightly different from those of another of the same country. In fact, as reported in one of his well-known publications: Every person carries within him or herself patterns of thinking, feeling, and potential acting which were learned throughout their lifetime. Much of it has been acquired in early childhood, because at that time a person is most susceptible to learning and assimilating. [ ] A person s behavior is only partially predetermined by her or his mental programs: (s)he has a basic ability to deviate from them, and to react in ways which are new, creative, destructive, or unexpected. 11 (G. Hofstede) 11 G. Hofstede, Cultures and Organizations: Software of the Mind,

21 Moreover, is interesting how Hofstede assumes that there are two kinds of culture: one is that commonly known as civilization and one is that broader definition used by anthropologists. In fact let me quote a passage of his publication, fundamental to understand his point of view on the actual meaning of culture: In most Western languages culture commonly means civilization or refinement of the mind and in particular the results of such refinement, like education, art, and literature. This is culture in the narrow sense ; I sometimes call it culture one. Culture as a mental software, however, corresponds to a much broader use of the word which is common among social anthropologists: this is culture two. [ ] In social anthropology, culture is a catchword for all those patterns of thinking, feeling, and acting. [ ] Not only those activies supposed to refine the mind are included in culture two, but also the ordinary and mental things in life. [ ] culture two deals with much more fundamental human processes than culture one; it deals with the things that hurt. 12 (G. Hofstede) Furthermore, Hofstede s culture point of view focus on the fact that culture is something that shouldn t be studied on a single person but on a community - even if there s a little variable that depends on personality - giving the possibility to understand his contrariety to ancient definitions of culture, which state that culture is something personal and not shared so much among people. In fact, the Author continues by saying: Culture (two) is always a collective phenomenon, because it is at least partly shared with people who live or lived within the 12 Ibidem 21

22 same social environment, which is where it was learned. It is the collective programming of the mind which distinguishes the members of one group or category of people from another. 13 (G. Hofstede) This means that there are some common values within a community and, for this reason, whoever wants to understand its culture shouldn t focus the attention on a single person if the goal is to understand how to deal with that community. Moreover, is interesting how the Author wants to repair culture from human nature and individual s personality pressures giving a picture of a pyramid when culture is between those two social definitions: Culture should be distinguished from human nature on one side, and from an individual s personality on the other. [ ] Human nature is what all human beings [ ] have in common: it represents the universal level in one s mental software. It is inherited with one s genes; [ ] The personality of an individual, on the other hand, is her/his unique personal set of mental programs which (s)he does not share with any other human being. It is based upon traits which are partly inherited with the individual s unique set of genes and partly learned. learned means: modified by the influence of collective programming (culture) as well as unique personal experiences. 14 (G. Hofstede) In this way, the reader has now obtained a clear picture of what culture is and is even provided a set of definitions in order to avoid including other definitions like personality or human nature in the culture s one. 13 Ibidem 14 Ibidem 22

23 It s important to understand that the Author doesn t want to isolate the definition of culture from these two other important definitions but he underlines that they re correlated, in very close contact with culture, but they re not part of its definition. In fact, the following figure gives an ideal picture of what culture is and what kind of role it plays in the human beings. As can be seen in the picture, culture is something that let human nature be in contact with personality. Culture is fundamental for people in order to differ from ancientprimitive human beings. PERSONALITY Speci\ic to individual; Inherited and learned. CULTURE Speci\ic to group or category; Learned. HUMAN NATURE Universal; Inherited. Figure 1 Three levels of uniqueness in human mental programming. 15 (G. Hofstede) From this picture is also possible to understand which elements among personality, culture and human nature are learned and which are inherited, meaning that there are some traits of our human being that comes from ancient generations. As said before, the Author wants to move out from ancient authors definition of culture that attributed cultural traits to heredity since they did not know how to explain the differences in culture patterns among human groups. 15 Ibidem 23

24 Furthermore, it is possible to see that the more we get to the top of the pyramid, the more specific is the trait of a human being. In fact, human nature is universal, in the sense that we all start from a base that can be assimilated to the human being; then, culture is shared among groups or categories of people and differences among groups are due to how we learn from previous generations; finally, personality is something really personal, that is both inherited and learned and let people be slightly different from each other. To understand this strange kind of trait it is possible to think about how everybody changes from childhood when growing: personality changes as we grow and learn what is and what is not good for ourselves Hofstede on culture manifestation Hofstede gave also an interesting idea of culture manifestation. Culture is programmed through symbols, heroes, rituals and values that can be represented in a figure similar to the skins of an onion. Symbols, as said by Hofstede, are represented by words, gestures, pictures or objects that carry a particular meaning which is only recognized by those who share the culture (Hofstede, 1996). From Hofstede s publication is possible to understand that words contained in a language sometimes disappear and new one could arise, creating a common jargon that is developed quickly since symbols that constitute it can be easily copied. For this reason, symbols are on the outer layer of the figure. Heroes are persons, alive or dead, real or imaginary, greatly appreciated in a culture, which have the particular characteristics such as to serve as a model to follow. As said by Hofstede, even phantasy or cartoon figures, like Batman or, as a contrast, Snoopy in the USA, Asterix in France, or Ollie B. Bommel (Mr Bumble) in the Netherland can serve as cultural heroes (Hofstede, 1996). The author also outlines the impact that television has had, greatly increasing the importance of outward appearances in the choice of heroes. Rituals are collective activities that are intended to achieve the desired ends, activities that are considered socially essential within a community, carried out only to 24

25 obtain welfare, but that could seem superfluous to other communities. Hofstede considers, for example, political or business meetings that seem to be organized for rational purposes but are organized just to affirm the character of major importance. In the figure, image, symbols, heroes and rituals have been included in the term practices and are visible to an outside observer, but only experts can interpret their cultural significance. As said by Hofstede: The core of culture [ ] is formed by values. Values are broad tendencies to prefer certain states of affairs over others. [ ] they [the values] have a plus and a minus side. They deal with: evil vs. good dirty vs. clean ugly vs. beautiful unnatural vs. natural abnormal vs. normal paradoxical vs. logical irrational vs. rational Values are among the first things children learn-not consciously, but implicitly. Development psychologists believe that by the age of 10, most children have their basic value system firmly in place, and after that age, changes are difficult to make. [ ] many values remain unconscious to those who hold them. Therefore they cannot be discussed [ ]they can only be inferred from the way people act under various circumstances. 16 (G. Hofstede) 16 Ibidem 25

26 In the same publication, Hofstede points out that it is difficult to study values of a community with a simple questionnaire, since people not always act as they have scored on the questionnaire. While stating that, the Author makes an example to understand that even if people not always act as they have scored, different answers given for the same question in two different communities let a researcher understand the differences between them. In fact: Still the questionnaires provide useful information, because they show differences in answers between groups or categories of respondents. For example, suppose a question asks for one s preference for time off from work versus more pay. An individual employee who states (s)he prefers time off may in fact choose the money if presented with the actual choice, but if in group A more people claim preferring time off than in group B, this does indicate a cultural difference between these groups in the relative value of free time versus money. 17 (G. Hofstede) Moreover, Hofstede pointed out the importance of understanding the difference between the desirable and the desired: the difference between how people think the world should be and what they want for themselves. To avoid misunderstandings, the Author explains that different kinds of questions have been asked: Questions about the desirable refer to people in general. [ ] The desired, on the contrary, is worded in terms of you or me and what we consider important, what we want for ourselves, including our less virtuous desires. The desirable bears only a faint resemblance to actual behavior, but even statements about the desired, although closer to actual behavior, should not 17 Ibidem 26

27 necessarily correspond to the way people really behave when they have to choose. 18 (G. Hofstede) The following figure represents symbols, heroes, rituals (altogether, Practices) and values. I preferred to faithfully represent it since the image of an onion gives a better representation of what has been explained by Hofstede: (G. Hofstede) 19 Figure 2 The onion diagram : manifestations of culture at different levels of depth 18 Ibidem 19 Ibidem 27

28 1.7. Nowadays Schein s definition of culture Actually, an important author, influenced by Hofstede s definition is Edgar Henry Schein since it s definition of culture reflects both the learning and teaching process of culture. Moreover, he gives a new way to think about cultural manifestation, divided into levels rather than skins of an onion. Schein gives a definition of culture that is concurring with Hofstede s one. In fact, according to Schein s definition: The culture of a group can now be defined as a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems. (Schein) 20 This definition gives the idea that culture is something learned when growing, depending on the context in which everyone spends his own childhood. Moreover, it is clear that culture is not static but it adapts and integrate when needed. The definition ends with the important characteristic of cultural transfer to new members i.e. new generations or immigrants since if we learned culture, somebody taught it to us and we will teach it automatically. As said before, Hofstede s point of view is similar to Schein s one, remarking the fact that Hofstede has had a huge impact on the cultural doctrine. However, Schein differs from Hofstede for what concerns culture manifestation. He states that there are three different levels, being the third the most difficult to observe, the first the most tangible and explicit manifestations and in between there are beliefs, 20 Edgar H. Schein, Organizational Culture and Leadership,

29 values, norms, and rules of behavior the are used by people to adapt the culture to themselves and others. These levels are labeled Artifacts, Espoused Beliefs and values and Underlying Assumptions. The first one, Artifacts, is the easiest level to perceive but at the same time it is also very difficult to decipher since this level includes all the phenomena that are around us. Using Schein s words, Artifacts: [ ] Includes all the phenomena that one sees, hears, and feels when one encounters a new group with an unfamiliar culture. Artifacts include the visible products of the group, such as the architecture of its physical environment; its language; its technology and products; its artistic creations; its style, as embodied in clothing, manners of address, emotional displays, and myths and stories told about the organization; its published lists of values; its observable rituals and ceremonies; and so on. [ ] Observers can describe what they see and feel, but cannot reconstruct from that alone what those things mean in the given group, or whether they even reflect important underlying assumptions. (Schein) 21 The second level is formed by the Espoused Beliefs and Values existing in a group. This level is directly affected by the third level and affects the first one since it is formed by values and beliefs that are given for granted thanks to the experiences made in the past. Schein underlines the fact that a leader can transfer his/her espoused beliefs and values by simply giving demonstration that what he/she believes works well in certain situations. Just saying what to do in a given situation is not enough; the action must be made and successful to convince others that leader s values and beliefs are the correct one in that particular situation. If that situation is solved thanks to the leader s beliefs, other members of that group will automatically spouse that beliefs and will 21 Ibidem 29

30 act accordingly to them if a similar situation will arise in the future. As said by Schein: All group learning ultimately reflects someone s original beliefs and values, their sense of what ought to be, as distinct from what is. When a group is first created or when it faces a new task, issue, or problem, the first solution proposed to deal with it reflects some individual s own assumptions about what is right or wrong, what will work or not work. Those individuals who prevail, who can influence the group to adopt a certain approach to the problem, will later be identified as leaders or founders, but the group does not yet have any shared knowledge as a group because it has not yet taken a common action in reference to whatever it is supposed to do. Whatever is proposed will only be perceived as what the leader wants. Until the group has taken some joint action and together observed the out- come of that action, there is not as yet a shared basis for determining whether what the leader wants will turn out to be valid. For example, in a young business, if sales begin to decline a man- ager may say We must increase advertising because of her belief that advertising always increases sales. The group, never having experienced this situation before, will hear that assertion as a statement of that manager s beliefs and values: She believes that when one is in trouble it is a good thing to increase advertising. What the leader initially proposes, therefore, cannot have any status other than a value to be questioned, debated, challenged, and tested. If the manager convinces the group to act on her belief, and if the solution works, and if the group has a shared perception of that success, then the perceived value that advertising is good gradually becomes transformed: first into a shared value or 30

31 belief, and ultimately into a shared assumption (if actions based on it continue to be successful). If this transformation process occurs, group members will tend to forget that originally they were not sure and that the proposed course of action was at an earlier time just a proposal to be debated and confronted. (Schein) 22 The third level named Basic Underlying Assumptions by the Author - is the most difficult to observe and to understand. In this level stand all those values and beliefs that became given for granted thanks to the numbers of situations in which they worked good, solving problems and troubles. These assumptions are not easy to change; changes occur only if there is strong and tangible evidence proving that new assumptions are better than old ones. However, changes in basic assumptions should follow the process: Artifacts change previous Espoused Beliefs and Values becoming Basic Underlying Assumption. In fact, what is given for granted is not directly changeable, every person have to feel consequences that certain new beliefs have on certain situations. In other terms, act to understand: nobody will change his or her basic assumptions only with simple words. As said by Schein: When a solution to a problem works repeatedly, it comes to be taken for granted. What was once a hypothesis, supported only by a hunch or a value, gradually comes to be treated as a reality. We come to believe that nature really works this way. [ ] [Basic assumptions] have become so taken for granted that one finds little variation within a social unit. This degree of consensus results from repeated success in implementing certain beliefs and values. [ ] In fact, if a basic assumption comes to be strongly held in a group, members will find behavior based 22 Ibidem 31

32 on any other premise inconceivable. [ ] Basic assumptions, like theories-in-use, tend to be nonconfrontable and nondebatable, and hence are extremely difficult to change. To learn something new in this realm requires us to resurrect, reexamine, and possibly change some of the more stable portions of our cognitive structure. [ ]Such learning is intrinsically difficult because the reexamination of basic assumptions temporarily destabilizes our cognitive and interpersonal world, releasing large quantities of basic anxiety. Rather than tolerating such anxiety levels, we tend to want to perceive the events around us as congruent with our assumptions, even if that means distorting, denying, projecting, or in other ways falsifying to ourselves what may be going on around us. It is in this psychological process that culture has its ultimate power. Culture as a set of basic assumptions defines for us what to pay attention to, what things mean, how to react emotionally to what is going on, and what actions to take in various kinds of situations. Once we have developed an integrated set of such assumptions a thought world or mental map we will be maximally comfortable with others who share the same set of assumptions and very uncomfortable and vulnerable in situations where different assumptions operate, because either we will not understand what is going on, or, worse, we will misperceive and misinterpret the actions of others (Douglas, 1986) (Schein) 23 A representation of the three levels follows. 23 Ibidem 32

33 Artifacts Visible organizational structures and processes Hard to decipher Espoused Beliefs and Values Strategies, goals, philosophies Espoused justifications Underlying Assumptions Unconscious, taken-for-granted beliefs, perceptions, thoughts and feelings Ultimate source of values and action Figure 3 Schein's Levels of Culture Other considerations Finally, it is possible to affirm that nowadays there are different cultures due to different paths of evolution. These differences have to be taken into account when dealing with a globalized market since it is possible to have a company that produces something useful in a country that in the same time can be completely useless somewhere else or, at the same time, a kind of employee that is unsuitable or more productive in a specific country. The uselessness of a product or of an employee - can be justified by a country s evolution that has evolved at a faster pace or in a different way than that of the home-country. For what concerns products, however, when this difference arises, there is the possibility to import knowledge since we live in a globalized world and, thanks to this opportunity, the stages of evolution have been matched over time, leading in my 24 Ibidem 33

34 opinion to a certain form of homogenization of culture, something like an international culture, in which some basic values are accepted throughout the world. Nevertheless, different habits and values are still a matter of fact and I think that a foreign user must take these differences into account and shouldn t try to change them. At most, I think that foreign investors can attempt to add their values in the community s culture without replacing its pillars, since they re the result of a long process of evolution. Globalization history is full of examples of cultural export. One of these can be the FDI made by Walt Disney in Tokyo in The American MNC invested in Tokyo building an exact copy of the Californian Disneyland Park. The gate receipts for this detailed replica met and exceeded expectations from the day the Tokyo Park opened, even if cultures were, and still are, completely different. In this particular case, there has been a phenomenon completely rare; in fact, as reported by Hofstede in 1993: [ ] when Disney officials expressed an interest in providing some home country attractions, such as a Samurai Land, to replace one of its American attractions or a ride and narrative based on the classic Japanese children s story The Little Peach Boy, the Japanese partners in Tokyo Disneyland resisted strenuously and insisted on a duplicate American version, thus retaining the cultural purity of the original (Brannon 1990). The streams of visitors would then seem to validate the idea that Disney s cultural products and experience work in the same way across two radically dissimilar contexts, effectively and effortlessly transcending cultural boundaries. (G. Hofstede, Organization Theory and the Multinational Corporation) S. Goshal, D.E. Westney, Organization Theory and the Multinational Corporation, St Martin s Press, 1993, p

35 As seen in this example, exporting culture is possible and, in such a case, welcomed by the host country. This is a case in which cultures can live together in the same nation, without interfering. Finally, the way businesses are made is affected by user s cultures. For this reason, it is becoming a fundamental element of competition for modern enterprises to understand culture, since these users are more and more involved in multicultural fields. Not long ago, it was assumed that business and trade were zones culturally neutral, where the transactions took place in accordance with universally recognized standards. But this is only partly true. If on the one hand there are laws valid above the national legal systems, which regulate in a certain way international affairs, on the other hand the ways in which we conduct our business may be subject to strong influences. These measures, in fact, are an extension of our social and cultural environments, deeply influenced by cultural values and ways of behaving associated with them, considered absolutely a normal part of the culture of origin, but which may be totally out of place from the point of view of a foreign culture. So, problems arise not only for the product, or for the work itself, or simply for the language, but also by misunderstandings at the level of culture, the software of the mind, to use the Hofstede s metaphor, father of the modern approach to intercultural management. In the next section the Hofstede s model will be presented to understand how managers can use it as a tool to study the culture of a country in order to overcome failures due to differences among nations. 35

36 1.8. Introducing the Model As said before, the model is the result of years of data collection exactly the period between 1967 and 1973 made by Geert Hofstede while he was working in IBM. This model is the first one in the history that quantifies some aspects or dimensions of a human culture. Initially, it was based on four dimensions but in 1991 a new one was introduced, thanks to the collaboration between Geert Hofstede and Michael Harris Bond. Furthermore, in 2010, Michael Minkov introduced two new dimensions, but only one of them was added to Hofstede s model since the rejected one was really similar and correlated to that one introduced by Harris Bond. The values scored on each dimension are based on a survey that each year the Hofstede Centre updates and publishes, making them available for research and organizational purposes. Since its establishment, the Hofstede Centre became the Mecca of organizational culture consult, in fact, many organizations and even single employees ask for advices and tailored consults. The six dimensions included in the model are: Power Distance (PDI), Individualism (IDV), Masculinity versus Femininity (MAS), Uncertainty Avoidance (UAI), Pragmatic versus Normative (PRA) and Indulgence versus Restraint (IND) Power Distance (PDI) The first dimension is labeled Power Distance, and it can be defined as the degree of inequality among people which the population of a country considers as normal: from relatively equal (that is, small power distance) to extremely unequal (large power distance). All societies are unequal, but some are more unequal than others. (Hofstede, The Organizational Behavior Reader) J.S. Osland, D.A. Kolb, I.M. Rubin, The Organizational Behavior Reader,

37 Power distance, that is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. This represents inequality (more versus less), but defined from below, not from above. It suggests that a society s level of inequality is endorsed by the followers as much as by the leader. (Hofstede G.) 27 Inequalities among people are a matter of fact in every country, this dimensions gives an idea of how much people within a community accept it. The value scored in this dimension let us understand if those people accept these inequalities or if they tend to equalize the distribution of power. In other words, if a community tends to accept a distribution of power that is in the hand of few people, the score will be high, otherwise, if people tend to give the same or with little differences - powers to everybody, the score will be low. In large power distance countries, people feel that the power is centralized and whatever the authority decides, personal thoughts are seen as ineffective. Many hierarchical levels characterize the structure of organizations within such a country, there are many supervisors that control the production and performances are valued in numbers. Using Hofstede s words, in large power distance societies Hierarchy means existential inequality in which subordinates expect to be told what to do and ideal boss is benevolent autocrat (good father). These characteristics lead to the willingness of obtain more and more power, in fact, is for that reason that, in my opinion, there s a sort of correlation between Power Distance and Masculinity. In fact, I ve seen that, in some countries, if we put in a diagram the scores for masculinity and power distance available on the Hofstede Centre website, there a sort of correlation between these two dimensions. Nevertheless, there are some countries that scored high in Power Distance and relatively low in Masculinity, so there isn t an exact correlation among them. 27 Hofstede G., The International Encyclopedia of Business & Management Handbook of Organizational Behaviour, p

38 The result is shown in the following table: M asc 80 u li n it y Power Distance Italy Japan Belgium French Colombia Hong Kong Poland Morocco Switzerland French India Ecuador Arab countries Bangladesh China Mexico Venezuela Philippines Malaysia Slovak Rep Table 1 Power Distance and Masculinity correlation in 18 countries. (Hofstede, Hofstede Centre) 28 Quite the reverse, in small power distance countries, organizational structures are flat and supervision is not as strict as in large power distance ones. Furthermore, every employee is involved in the management, giving them the idea that the authority is decentralized, since decisions are taken with a clear understanding of every point of view. Using Hofstede s words, in small power distance societies hierarchy means an inequality of roles, established for convenience in which subordinates expect to be consulted and ideal boss is resourceful democrat. 28 Datas taken from the Hofstede Centre Website 38

39 The table below shows the characteristics both for large and small power distance countries: LARGE POWER DISTANCE Centralized Authority Autocrathic Leadership Paternalistic Management Style Many Hierarchical Level Large Number of Supervisory Staff Acceptance that Power has its Privileges An Expectation of Inequality and Power Differences SMALL POWER DISTANCE Decentralized Authority and Decision Making Responsibility Consultative or Participative Management Style Flat Organizational Structures Small Proportion of Supervisory Staff Lack of Acceptance and Questioning of Authority Rights Consciousness Tenendency Toward Egalitarianism Table 2 Large and Small Power Distance Characteristics So, when dealing with a large power distance country, managers that want to invest there by building a subsidiary should know that the organizational structure will have to be very hierarchical, since workers in that country will appreciate or at least accept the fact that the power is in the hand of few people and will follow management s principles without debating them. If, instead, the multinational s target is a low power distance country, then the organizational structure will be completely different from the previous one: there will have to be few hierarchical levels and the organization should focus on communication between management and workers, giving the idea that every thought is important in the management of the business. 39

40 Individualism (IDV) The second dimension is labeled Individualism, and it is the degree to which people in a country prefer to act as individuals rather than as members of groups. The opposite of individualism can be called Collectivism, so collectivism is low individualism. The way I use the word it has no political connotations. In collectivist societies a child learns to respect the group to which it belongs, usually the family, and to differentiate between ingroup members and out-group members (that is, all other people). When children grow up they remain members of their group, and they expect the group to protect them when they are in trouble. In return, they have to remain loyal to their group throughout life. In individualist societies, a child learns very early to think of itself as I instead of as part of we. It expects one day to have to stand on its own feet and not to get protection from its group any more; and therefore it also does not feel a need for strong loyalty. (Hofstede, The Organizational Behavior Reader) 29 Individualism on the one side versus its opposite, collectivism, that is the degree to which individuals are integrated into groups. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family. On the collectivist side we find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families (with uncles, aunts and grandparents) which continue protecting them in exchange for unquestioning loyalty. The word collectivism in this sense has no political meaning: 29 J.S. Osland, D.A. Kolb, I.M. Rubin, The Organizational Behavior Reader,

41 it refers to the group, not to the state. Again, the issue addressed by this dimensions is an extremely fundamental one, regarding all societies in the world. (Hofstede G.) 30 This dimension gives an idea of how people in a community relate each other. If people within a community like to constantly be in touch, for both work and friendship, the score will be high; instead, if they like to work alone or if they get in touch with others only for work purposes, the score will be low. In the definition of the second dimension, the Author underlines the impact that growing in a group has on a person s attitude. In fact, this dimension is affected by values learnt by the family or group - when growing that will be kept throughout the entire life. Individualistic cultures are characterized by the self-consciousness: people act having in mind what kind of the profits that a relationship will generate, if profits perceived - or expected are low, people in that country won t foster these relationships. Furthermore, self-interests are far more important than collective ones, valuing fun and personal enjoyment more than social norms and duties. Moreover, in countries with this kind of culture, challenges for different points of view happens very often since people think that their beliefs are unique. Collectivist cultures, instead, behave according to social norms in order to maintain stable and harmonious relationships and they don t think only to their selves but share resources for collective interests. Furthermore, people tend to understand other points of view without challenging that much, but trying to arrive to a shared opinion. Moreover, these communities are very concerned about in-group people, e.g. family or friends, and try to help them whenever it s asked and possible. In other terms, people within this kind of community think to their selves for sure, but they aren t fully realized if their friends aren t happy. When investing in countries characterized by an Individualistic culture, a multinational should take into consideration the fact that different points of view on an argument will lead to misunderstandings and low productivity; group works could be less productive than solo-projects if groups are made of people with different thoughts 30 Hofstede G., The International Encyclopedia of Business & Management Handbook of Organizational Behaviour, p

42 since it will be difficult that these people will find a solution accepted by everyone. In other terms, people in individualistic cultures are mercenaries that will work for you only for their personal advantage. If multinational s activities are based on group works, a collectivistic culture has to be preferred since in these countries groups productivity can be very high even if thoughts are different, because it is always possible to find a solution. This kind of community has to be preferred when the management wants to create a place of work when benefits of each employee lead to higher profits. I can think about firms like Google Inc., a multinational characterized by a place of work in which friendship and fun are key terms for success. According with the score value, some general characteristics for both individualistic and collectivistic cultures are summarized in the following table. Individualistic Cultures Foster contractual relationships that are based on the principles of exchange. They calculate profit and loss before engaging in a behavior; Focus on self or at most on close loved ones, are concerned with the relationship between their behaviors and their own needs, interests & goals; Value independence & self-sufficiency; Place self interests above collective interests; Accept confrontation as an attribute; Emphasize pleasure, fun & personal enjoyment more than social norms and duties belong to many in-groups that exert little influence on their lives; Believe that their beliefs are unique. Collectivistic Cultures Behave according to social norms that are designed to maintain social harmony among members of an in-group; Consider implications of their actions for wider collective; Share resources and are prepared to sacrifice personal interest for collective interests; Favor certain in-group (e.g. family, friends); Are very concerned about in-group members and are indifferent or hostile toward out-group members; Emphasize hierarchy and harmony with group; Regulate behavior through group norms. Table 3 Individualism - Collectivism Characteristics 42

43 Masculinity versus Femininity The third dimension is called Masculinity and its opposite pole Femininity. It is the degree to which tough values like assertiveness, performance, success, and competition, which in nearly all societies are associated with the role of men, prevail over tender values like the quality of life, maintaining warm personal relationships, service, care for the weak, and solidarity, which in nearly all societies are more associated with women s roles. Women s roles differ from men s roles in all countries; but in tough societies, the differences are larger than in tender ones. (Hofstede, The Organizational Behavior Reader) 31 Masculinity versus its opposite, femininity refers to the distribution of roles between the sexes which is another fundamental issue for any society to which a range of solutions are found. (Hofstede G.) 32 The IB studies revealed that women s values differ less among societies than men s values and that men s values from one country to another contain a dimension from very assertive and competitive and maximally different from women s values on the one side, to modest and caring and similar to women s values on the other. The assertive pole has been called masculine and the modest, caring pole feminine. The women in feminine countries have the same modest, caring values as the men; in the masculine countries they are somewhat assertive and competitive, but not as much as the men, so that 31 J.S. Osland, D.A. Kolb, I.M. Rubin, The Organizational Behavior Reader, Hofstede G., The International Encyclopedia of Business & Management Handbook of Organizational Behaviour, p

44 these countries show a gap between men s values and women s values (Hofstede G.) 33 In this dimension the lifestyle is the topic; basing on what kind of ambitions people within a community have, the score will be high or low according with them. High scores lead to a Masculinity culture, meaning that tough ambitions are common in that country; on the opposite side, low scores lead to a Femininity culture, in which values like having an healthy life or harmony are felt very much. Masculine cultures are characterized by the fact that gender roles are clearly distinct, meaning that there is a common thought that there are some roles in which women can do better and some other roles that best fit to men. In this kind of countries, men are seen as tough and focused on material success while women are seen as modest and kind. Using Hofstede s words, in masculine societies assertiveness [is] appreciated and people tend to stress on careers. In countries characterized by a feminine culture (when masculinity dimension scores low) social gender roles overlap. In fact, a job can be done both by a man or a woman without any perception of difference. Moreover, in feminine cultures, both men and women are supposed to be modest and tender. In other terms, the core values in countries scoring low in this dimension are the quality of life and gender parity. Quoting Hofstede, in this kind of countries assertiveness [is] ridiculed and people tend to stress on life quality. Multinationals have to take into account these characteristics when dealing with social reputation because if in a Masculine country managerial powers are given to a woman, the community will see this phenomenon negatively or, at least, people will not feel confident with this decision. 33 ibidem 44

45 A summary of the Masculine and Feminine cultures characteristics are shown in the following table. Masculine Cultures Gender roles are clearly distinct; Men are supposed to be assertive, tough and focused on material success; Do not place great importance on benevolence; Places importance on the value of mastery (of job, nature, people, etc.); The women considered health, wealth & understanding as desirable characteristics of a husband; The women considered personality, affection, intelligence & sense of humor as desirable characteristics of a boyfriend Feminine Cultures Social gender roles overlap; Both men and women are supposed to be modest, tender and concerned with the quality of life; Desired traits in husbands were the same as desired traits in boyfriends (Hofstede, Sep. 1996, Journal. Cross Cultural Psychology); Emphasize non-materialistic aspects of success. Table 4 Masculine and Feminine Culture Characteristics Uncertainty Avoidance The fourth dimension is labeled Uncertainty Avoidance, and it can be defined as the degree to which people in a country prefer structured over unstructured situations. Structured situations are those in which there are clear rules as to how one should behave. These rules can be written down, but they can also be unwritten and imposed by tradition. In countries which score 45

46 high on uncertainty avoidance, people tend to show more nervous energy, while in countries which score low, people are more easy-going. A (national) society with strong uncertainty avoidance can be called rigid; one with weak uncertainty avoidance, flexible. In countries where uncertainty avoidance is strong a feeling prevails of what is different, is dangerous. In weak uncertainty avoidance societies, the feeling would rather be what is different, is curious. (Hofstede) 34 Uncertainty avoidance deals with a society s tolerance for uncertainty and ambiguity; it ultimately refers to man s search for Truth. It indicates to what extent a culture programmes its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; there can only be one Truth and we have it. People in uncertainty avoiding countries are also more emotional and are motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative and are not expected by their environment to express emotions. (Hofstede G.) J.S. Osland, D.A. Kolb, I.M. Rubin, The Organizational Behavior Reader, Hofstede G., The International Encyclopedia of Business & Management Handbook of Organizational Behaviour, p

47 In this dimension, fear of uncertainty is calculated. People that are adverse to uncertainty will score high, meaning that they re constantly looking for something that is safe and stable, without changes. On the opposite side, low score means that people are constantly looking for changes, even if this could be risky. When in a country there is a strong uncertainty avoidance, it s important to set many rules and to write it in a code, since people strongly prefer to be aware of what can be done and what is not allowed. As a consequence, standardized procedures are seen positively and any change in the routine can make people feel insecure and lost. Moreover, an authority that makes plans to be followed is seen as indispensable and deviants from these plans are unbearable. Using Hofstede s words, there is an Emotional need for rules written or unwritten, organizations need More formalization and standardization and there is an Intolerance of deviant persons and ideas. Multinationals that want to invest in this kind of countries should take into consideration to write down a code of conduct, and clear planning must be done in order to achieve positive goals. Finally, people within a rigid country tend to accept promotions based on seniority or age since this would mean that procedures and rules have been carefully followed. On the opposite side, in flexible countries in which there is weak uncertainty avoidance people are confortable with risks, flexible and bored by routines. Here, promotions should be given for merit and the structure should be as horizontal as possible without so many written rules. Organizational life is different day to day and different behaviors within the firm are tolerated or, better, welcomed. Here Hofstede says that in weak uncertainty avoidance societies there is a Dislike of rules written or unwritten, organizations need Less formalization and standardization and there is Tolerance of deviant persons and ideas. Multinationals that wish to invest in flexible countries should take into consideration the fact that rules and procedures are seen negatively, even if a basic set of rules should be adopted in order to avoid a complete anarchy. Here, multinationals characterize by a day-to-day business in which unpredictable events could happen are successful since people within a flexible country are confortable with this kind of events and are able to take decisions faster than people in rigid countries. 47

48 Since in flexible countries different behaviors are welcomed, I thought that there could be a sort of relationship between uncertainty avoidance and individualism dimensions. Here s the result if we plot in a table the results obtained by the Hofstede Centre for both dimensions: there s a little negative correlation, meaning that the higher the Individualism, the lower the Uncertainty Avoidance, as expected. This correlation is showed in the following graph. 120 Uncertainty Avoidance y = - 0,1584x + 74,796 R² = 0, Individualism Countries Lineare (Countries) Table 5 Individualism and Uncertainty Avoidance Correlation. (Hofstede Centre) 36 The correlation is really low but, anyway, this means that there are a lot of countries that scored high in Individualism and low in Uncertainty Avoidance. The most important difference that has been studied by researchers on this dimension is that companies in high uncertainty avoidance countries tend to hold more cash in order to hedge against a potentially risky future 37 (Ramirez, A. Tadesse, S.). 36 Datas taken by the Hofstede Centre s website 37 Ramirez, A., & Tadesse, S. (2009). Corporate cash holdings, uncertainty avoidance, and multinationality of firms. International Business Review, 18 (4),

49 Instead, in low uncertainty avoidance countries cash is not retained so much, resulting in a higher pace of innovation (Singh) 38. Moreover, Individuals high on uncertainty avoidance tend to give more loyalty to a brand than individuals low in this dimension ( (Desmond) 39 ; (Lam) 40 ). Depending on how much high is the value, characteristics for both rigid and flexible countries are summarized in the following table. Strong Uncertainty Avoidance (Rigid) Avoidance of Risk Organizations that have clearly delineated structures, many written rules, standardized procedures Promotions based on seniority or age Lack of tolerance for deviants Strong need for consensus Neeed for predictability hence, planning is important Respect for authority Weak Uncertainty Avoidance (Flexible) Risk Taking Tolerance of differing behaviors and opinions Flexibility Organizations with a relatively low degree of structure and few rules, promotions based on merit. Table 6 Strong and Weak Uncertainty Avoidance Characteristics 38 Singh, S. (2006). Cultural differences in, and influences on, consumers propensity to adopt innovations. International Marketing Review, 23(2), Desmond, L. (2007). Cultural influence on proneness to brand lotalty. Journal of International Consumer Marketing, 19(3), Lam, D. (2007). Ibidem 49

50 Pragmatic versus Normative (PRA) Since there isn t a publication made by Hofstede that gives a definition yet, I ll report the definition made by the Hofstede Centre for both Pragmatic versus Normative (PRA) and Indulgence versus Restraint (IND) dimensions: This dimension describes how people in the past, as well as today, relate to the fact that so much that happens around us cannot be explained. In societies with a normative orientation most people have a strong desire to explain as much as possible. People in such societies have a strong concern with establishing the absolute Truth and a need for personal stability. They exhibit great respect for social conventions and traditions, a relatively small propensity to save for the future and a focus on achieving quick results. In societies with a pragmatic orientation, most people don t have a need to explain everything, as they believe that it is impossible to understand fully the complexity of life. The challenge is not to know the truth but to live a virtuous life. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to accept contradictions, adapt according to the circumstances, a strong propensity to save and invest, thriftiness and perseverance in achieving results. (Hofstede Centre) 41 This dimension was firstly named Long Term versus Short Term Orientation and it deals with how much people are willing to live their lives day to day or if they prefer some sort of stability and plans for the future hofstede.com/dimensions.html 50

51 Normative societies are characterized mainly by the fact that future is something abstract for people living within them. They re focused on today and tend to avoid thoughts about the distant future. It s for this reason that those kinds of people are more likely to find stability, with a small propensity to save for the future focusing on quick results. Pragmatic societies, on the opposite, are characterized by the spasmodic planning of the life. People living in these societies tend to focus more on the future than the present. It s for this reason that they tend to appreciate a regulated life, and try to avoid deviants from plans. Multinational investing in a pragmatic society should take into consideration the fact that planning is important and that goals can be achieved slower than in normative society, where people tend to achieve results quickly, living day to day the organizational life. Characteristics both for Pragmatic and Normative societies are summarized in the following table: Pragmatic Society Personal steadiness and stability; Short term orientation; Short feedback cycles; Respect for tradition; Reciprocation of greetings, favors, and gifts; Absolute truths (e.g. law of gravity) Normative Society Persistence (perseverance) Ordering relationships by status The possibility of having many truths (depending on time and contect) Thrift; Having a sense of shame Table 7 Pragmatic and Normative Societies Characteristics 51

52 Indulgence versus Restraint (IND) Indulgence stands for a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint stands for a society that suppresses gratification of needs and regulates it by means of strict social norms. (Hofstede Centre) 42 This dimension was added because it focuses on aspects that are not covered by the other dimensions, which is happiness (G. Hofstede) 43 This dimension deals with hedonistic behaviors; in other terms, how freely can people satisfy their basic needs and desires, how strict social norms are followed and gratification regulated. In 2010, Hofstede made a research with his son, Gert Jan Hofstede, and another anthropologist, Michael Minkov. This research led to a new edition of Hofstede s book Cultures and Organizations: Software of the Mind in which this dimension was added and results of the research were published. When a country scores high in this dimension, material rewards are not so effective, since people value their happiness on other values like gratitude and empowerment. Here, people tend to give more value on freedom of expression and enjoying moments. Multinationals investing or having business relationships in this kind of country should focus on giving good experiences to people with whom they re in contact. On the opposite side, when a country scores low in this dimension, we re dealing with a Restraint country, which means that people within those countries give more value to material rewards when job are done perfectly. These rewards could often be seen as not sufficient, since people easily feels treated unfair. It s interesting to note that in these countries free expression of thoughts is not important. Multinationals should 42 hofstede.com/dimensions.html

53 take into consideration this material culture since relationships can be perceived negatively if rewards are not valuable enough for the counterpart. Since this dimension has been added in 2010 there isn t much literature to take into consideration, but some characteristics are available on the net. These characteristics are summed up in the following table: Indulgence Freely satisfy basic needs and behavior; Cannot easily be motivate with material reward; Enjoys moment rather than uses time to compare with others; Objects need to fulfill purpose not status; Adding meaning to peoples freedom of expression Restraint Gratification suppressed and regulated; Expects (material) reward for job done well; Easily feels treated unfair; Status objects important; Having a sense of control over ones life; Not the same in all countries; Free expression of thoughts is not important. Table 8 Indulgence and Restraint Culture Characteristics In this section, the Hofstede s model has been presented. Now, critics on the model will be presented, in order to provide the reader a broader knowledge of the debate and to let the reader make an own point of view on this subject Criticisms and approvals to the Hofstede s model As for every Author that has made theories in the literature, also Hofstede s model has been targeted by both criticisms and acknowledges. It is thanks to the Author that 53

54 culture has been increasing in importance in such fields like social sciences and international business, but there still are authors against his studies Arguments against the model Criticisms that surround the debate on cultural issue concern: relevance, cultural homogeneity, national divisions, one company approach, expiration of data and number of dimensions. For what concern the relevance of the research driven by the Author in order to create his model, many researchers argued that a survey is not enough to determine the culture of a population since this kind of tool is influenced by subjectivity and the subject of the research is really delicate to be studied only through a simple questionnaire. Apparently, it could seem that critics are valid since in the previous sections it has been explained that culture is a complex subject to deal with because there are many aspects to take into consideration in order to understand just only what does it mean; trying to give a picture of a community culture is far more complex. Another critic has been the assumption made by Hofstede of a cultural homogeneity within a community. Hofstede assumed that by taking into consideration a relevant sample, it is possible to extend the results to the entire population of a country. This assumption doesn t take into consideration the fact that a country is made of different groups and ethnic units so, for this reason, the sample should be made of people representing the situation of the entire country, but in scale. Hofstede, however, seems to ignore this aspect, and this cultural homogeneity assumption is the most criticized by the doctrine. Furthermore, Hofstede tries to set borders to culture by assuming that culture differs from a country to another. Cultural differences surely arise if we take into consideration huge distances, but reviewers argue that Nations are not the proper units of analysis since borders do not necessarily bound cultures. It is even possible that differences arise within the same country. One critic on which I strongly agree is the fact that Hofstede focused on surveying just one company s employees. Reviewers argued that information collected in one 54

55 company could not provide a useful picture of an entire country. I d like to add, however, that Hofstede s researches have provided a useful tool for management to analyze a company s culture. I do agree with reviewers: it s impossible to characterize a country by just surveying few employees of the same company, but managers should take into consideration this survey to understand if the company s culture is in line with employee s culture. In my opinion, a misfit between the two could lead to inefficiencies and low productivity. Another very relevant point is the fact that culture is not static, culture changes over time and values obtained and the survey itself should be constantly updated. Authors like M.L. Jones (2007) argued that since we live in a globalized world changes are much faster than in the past to believe that values provided by Hofstede are still useful. A criticism on which Hofstede agrees with is the fact that four or five dimensions are not enough to give a sufficient picture of a community culture. As said, Hofstede agrees and believes that adding new dimensions can be very useful it s for this reason that the sixth dimension was added in 2010 and he personally invites researchers to generate new ones Arguments in support of the model Not only criticisms have been addressed to the Hofstede s model. Some authors, in fact, are favorable to the results obtained by Hofstede and lots of citations have been made over the years. Actually, 1036 citations have been made, as reported by Søndergaard in one of his publications (Søndergaard) 44. Søndergaard points out that authors mainly agree with three aspects: Relevance, rigor and relative accuracy of the research. For what concern the relevance of the study, this is a debated point. In fact, as said in the previous section, some authors critic the fact that culture can t be studied through surveys. On the opposite side, many authors say that Hofstede s result gave to international businesses an overall picture of a targeted country s culture. Previously, managers targeting a foreign country didn t know so much about cultures and tried 44 Søndergaard, M. (1994), Hofstede s consequences: A study of reviews, citations and replications. 55

56 without taking into consideration this aspect, exposing their investments to failures. These authors are people that consider Hofstede as a pioneer of a new school of thought, a pioneer that introduced cultural issues in international business and social sciences. Another relevant point on which authors base their support to Hofstede is the rigorous design of the research framework and the coherence that it has with the theory and data collected. This is in contrast with critics claiming that samples were imperfect and not well distributed. Søndergaard has done a comparison between Hofstede s results and other authors replications. The result is that Hofstede s research is relatively accurate since the majority of the replications taken into consideration by the author confirmed Hofstede s estimates; four of them entirely corresponded, and 15 only partially agreed (Søndergaard) 45. Søndergaard research showed that the dimension on which lot of deviations arose was Individualism. Subsequently, Hofstede answered to this issue arguing that culture - and especially Individualism dimension - is subject to changes over time and research should be done periodically in order to solve the problem. 45 Ibidem 56

57

58 Second Chapter. The Hofstede s Model administered to ENEL S employees Introducing ENEL ENEL S.p.a., Ente Nazionale per l energia ELettrica, is an Italian company that operates in the electricity market. In particular, ENEL generates and distributes energy across several countries, not only in Europe. In fact, the company operates in 40 countries in 3 regions: Europe, North America and Latin America. In the energy sector, ENEL is the leader of the Italian market and the second company in Europe for installed capacity ENEL History The company was established in 1962 by the nationalization of the existing operators made by the Italian parliament, under proposal of the Prime Minister Aldo Moro, with the law no. 1643/1962. The law stated that the ownership of all the companies operating in the energy sector producers, distributors, sellers and all those companies functionally linked to these utilities would have been transferred to a new company, fully owned by the Italian state: the ENEL S.p.a. At that time, the major energy market players were: Sade, Società Adriatica di Elettricità, established in 1905; Edison, Società Generale Italiana di Elettricità Sistema Edison, established in 1884; Sip, Società idroelettrica piemontese, established in 1887; S.R.E., Società Romana di Elettricità, established in 1881; SME, Società Meridionale di Elettricità, established in

59 The nationalization was made in order to achieve the benefit for the consumers of a lower level of prices, benefit that was already gained by the French and English government, which nationalized few years earlier. During the nationalization process, ENEL faced the huge threat of managing 1270 different organizations simultaneously in order to coordinate all the supply in Italy, importing from abroad the power needs. The reorganization that has been done to organize the fragmented supply led to what still is the actual organization of the supply chain. During the 1970s, the change in consumer s lifestyle and the technology innovation people started using electrical appliances more than before led to an increase in power consumption causing an increase in the demand, thus increasing sales and revenues. Thanks to this increase in sales, ENEL became the second company in terms of sales in Italy. During the same period, ENEL made huge investments to expand the grid, giving the possibility also to people living in rural zones to ask for electricity. In the same period ENEL faced the international oil crisis, which affected not only the electricity industry but also the whole economic system. While the Italian govern adopted the so-called austerity policies in 1974 that obliged a reduction in energy consumption, ENEL decided to invest in research and development with the aim of finding a solution in the renewable sector. Thus, ENEL focused on nuclear power and hydroelectric power stations. The research resulted in a better knowledge of these power resources but nuclear power has never been produced in Italy - also due to the Chernobyl accident in 1986 that lead to a referendum that rejected the usage of nuclear power plants in Italy. For this reason, together with the fact that Italy has no oilfields, Italy has always been a net importer of energy power. The 1990s have been an important period for ENEL since in those years the company has been de-nationalized. Italian government had to face a huge public debt in order to achieve the requirements of the so-called European Community nowadays European Union and the Amato govern in 1992 passed the Decree Law no. 333 which was then converted into law by the Italian Parliament (Law 359/1992) - to reorganize the national accounts. The mentioned Decree established ENEL S.p.a. whose main shareholder was the Italian Treasury. The process of de-nationalization was long and it ended in 1999 with the D alema govern that created, with the Legislative Decree 59

60 n. 79, the Terna S.p.a. whose main shareholder was ENEL S.p.a. until the 2005, year in which the 30% of the Terna S.p.a s stock was transferred to Cassa Depositi e Prestiti S.p.a. an Italian bank whose 80% of the stock is owned by the Italian Ministry of Economy and Finance. The established company still exists and it s the Italian electricity transmission system operator that owns all ENEL S.p.a s grid assets that were transferred to it in order to grant the neutrality of the market 46. Nowadays, over 100 operators contend the electricity market that has become one of the most liberalized in Europe, but still ENEL S.p.a. is the most valuable operator Enel Green Power Italy is a net importer of chemistry hydrocarbons used to produce electricity and depends to North African and Middle East countries. Since Italy is the most importer in Europe and this cause an incredible dependence in terms of price, ENEL in 2008 has established a subsidiary that focuses on renewables: Enel Green Power S.p.a. that in few years has made numbers of investments, achieving an installed capacity of 6,490 MW in 2011 that will increase to 10,400 MW by In November 2010, a 30,8% stake of the company has been offered and placed at a price of 1,6 per share on the Borsa Italiana and Bolsa de Madrid, for a total amount of 2,6 billion, the largest IPO in Europe. Enel green power is present in Europe, North America, South America and Asia. An important share of Enel Green Power s plants are located in Italy (2,830 MW) with a production mix made by geothermal, hydro, wind and solar power electricity. In the Iberian Peninsula, mainly wind, mini-hydro, solar and biomass electricity plants make the production mix (for a total installed capacity of 1,707 MW). On the east, the company is present in Romania (498 MW) and Bulgaria (42 MW) with wind farms. Enel green power has wind farms also in other European countries such as France (166 MW) and Greece (172 MW) in which the company has also 5 hydroelectric plants (14 MW). 46 The Gestore della Rete di Trasmissione Nazionale National Power Grid Manager - also grants neutrality. 60

61 In North America, the company has an overall capacity of 786 MW among for different technologies: hydroelectric plants, wind farms, geothermal plants, biomass plant and a wind farm; these plants are both in the United States and in Canada. In Latin America, Enel green power is present in Mexico, Costa Rica, Guatemala, Nicaragua, Panama, Chile and Brazil for a capacity of over 700 MW. The following pictures show in details the presence of Enel Green Power in the world: Figure 4 Enel Green Power in North and Latin America. (ENEL) Enel Green Power Brochure 61

62 Figure 5 Enel Green Power in Europe (ENEL) 48 Figure 3, instead, shows the countries from which Italy imports Oil and Gas for electricity purposes: 23% 15% 14% 13,50% 13% 9,50% 7% 3,20% 1,80% Figure 6 Italian hydrocarbons dependance: main importers Ibidem 62

63 2.2. ENEL S.p.a. presence in the world As introduced in this chapter, ENEL has got assets not only in Europe but also in different parts of the world. In this section the internationalization process will be presented giving an idea of how ENEL has become one of the most powerful actors in the energy sector worldwide. ENEL s internationalization had an important resonance in 2007 when the company gained control over the Spanish Endesa, the most important company in the Iberian market. The acquisition of this important company led ENEL to be taken into consideration as a multinational company, but this acquisition wasn t the only one that it has been made over the years. In fact, ENEL group had broadened its borders some years earlier in Europe and America. However, ENEL didn t start investing abroad immediately after the liberalization of the 1990s. In fact, during the period right after the liberalization, ENEL tried to increase its revenues through a process of diversification. Thus, the company invested in the telecommunication sector acquiring stocks in WIND S.p.a. but, since this choice was not so profitable, in 2006 ENEL completely abandoned that sector and decided to focus only on the power sector investing not only in Italy. The strategy of a multi- sector diversification was mainly abandoned in order to catch the opportunities offered by the gradual liberalization of the European energy market. Under this aspect, the internationalization allowed the company to grow diversifying the risk but not the business: the presence in 22 markets allows the multinational to achieve the advantages of the diversification strategy avoiding the disadvantages of this kind of strategy, like the development of the proper know how that requires long term investments or inefficiencies. To complete the process of internationalization, ENEL nowadays has a balanced mix of assets, both technologically and geographically, and benefits the advantages of focusing on only one business the energy sector- in terms of synergies and economies of scale. 49 Data provided by ENEL S.p.a. 63

64 ENEL s organizational structure has been reorganized to perfectly fit the strategy of internationalization of the core business. So, the company is an industrial holding with operative divisions that manage the subsidiaries; these divisions are Generation and Energy Management, Infrastructures and Networks, Iberian and Latin America, Renewable Energies, International, Engineering and Research, Upstream Gas and Carbon Strategy. This organization is therefore extremely enlightening the deep reorganization and future strategies of the whole company - reflecting inside the relevance of the Iberian and American markets in the context of the internationalization program - the abandonment of the monopolistic logic and the renouncement of all forms of diversification from the core business and the areas immediately adjacent to the generation of electricity. The investments made in the countries entered in the European Union thanks to the enlargement of 2005 represented the main cornerstone of the whole internationalization strategy. In this perspective, ENEL s determination of being identified as Slovakian partner during the privatization of Slovenské Elektrárne (SE) was to be the focal point of a broader consolidation of the company s work in this geographic area, a process that now has been made on the Balkan area with significant positions in Bulgaria and Romania. In the first country ENEL controls ENEL Maritza east 3, owning the 73% of the stock, which in turn owns a lignite- fuelled power plant with an installed capacity of 908 MW that accounts for approximately 10% of the country s total installed capacity. The remaining 27% of ENEL Maritza s stock is still owned by NEK, the Bulgarian public power company, which has given to ENEL the majority share in order to let her manage the requalification process required by the European Union. The requalification ended in 2009 and consisted in the extension of the operating life of the plant and the increase of its installed capacity. In Romania, ENEL operates in the distribution and sale of energy power and controls the majority of share in the distribution companies Timisoara and Costanza, located in Bucharest. Nowadays, ENEL is making investments on the power generation segment in order to increase its 64

65 presence in this country. In details, ENEL is building two coal power plants and increasing the capacity of the nuclear plant of Cernavoda. The huge investments that ENEL is making are based on the increase in power demand in these three countries, an increase that is due to the incredible economic growth registered in the period before the economic crisis of In fact, the GDP growth rates in that countries were always more than 5%, as showed in the following table: Growth Rate Italy 1,731 0,931 2,199 1,683-1,156 Bulgaria 6,748 6,358 6,511 6,448 6,191 Romania 8,49 4,154 7,875 6,317 7,349 Slovak Republic 5,058 6,655 8,345 10,494 5,751 Table 9 Growth rates (International Monetary Fund) 50 Another important aspect is the proximity of these markets - especially Bulgarian and Romanian ones - that might create synergies, allowing the company to act as a unitary and integrated operator. Not far from these two realities, but in a political and economical contest extremely different, ENEL recently invested in the Russian market. In 2007, ENEL made two important maneuvers that have been the most important investments made in the 50 Source: International Monetary Fund (IMF) 65

66 Eastern Europe. The acquisition of Eni-Neftegaz 51 s 40% stock has been the first action, while the second investment was that one made in OGK-5 an important electricity company that owns plants in central and north Russia for 8,672 MW- in which ENEL acquired the control. These investments are in line with ENEL s strategy since now ENEL is vertically integrated in this country, from the gas extraction to the distribution of the power generated. In 2009, ENEL sold the 51% of Severenergia s stock to Gazprom, reducing to 19,6% the share that it owns in the Russian supply chain. This sale was made in order to guarantee itself the possibility to operate in the Federation since Gazprom is the cornerstone of Russian energetic strategy to control European supply. Moreover, ENEL s operations made in other territories will have to be studied in the sense of not going against Gazprom s interests because a competition could represent a high risk to the investments made so far. Since Gazprom is dominant in the European energy supply market, ENEL should avoid any kind of conflict but at the same time should try not to be dominated. These kinds of situations are not easy to manage but ENEL s management has done successful actions so far in order to maintain good relationships with Gazprom and Russian Federation and one of these actions was the sale of the 51% of Severenergia s stock mentioned above. Not only investments in assets has been made in Russia; in 2007, ENEL and the RosAtom State Atomic Energy Corporation had signed a Memorandum of Understanding with the aim of developing the electricity system and nuclear generation, not only in Russia, but also in Europe. With this agreement, RosAtom and ENEL made a declaration of intent of developing collaborations even through common investments and participations. This agreement had increased the relevance of ENEL s presence in Russia that is now making numbers of projects with this state corporation. Different investment strategy has been registered in France, where ENEL acquired Erelis and is concentrating in renewables. In fact, the main investments made by ENEL in France are the ten wind farms that account for MW but it manages also a portfolio of 1,000 MW. ENEL had invested - together with EDF - also in the nuclear sector on the European Pressurized Reactor project with a share of 12,5% but in 2012 ENEL decided to come out from this project and asked back the anticipated cost that 51 Today the company is named SeverEnergia and has got a relevant share of Yukos oil Company s assets 66

67 account for 613 million plus the accrued interest. This decision, as explained by the company, has been taken due to delays and increases in costs of the project. In addition, the referendum in June 2011 in Italy, which has prevented the development of nuclear energy in the country, has reduced the strategic importance of the entire collaborative agreement with EDF. (Il Fatto Quotidiano)52 Crossing the Atlantic Ocean, ENEL has made investments in North and Latin America. Also here ENEL focuses on renewables; in fact, ENEL North America has an installed capacity of 788 MW among Hydric, Geothermal, Wind and Biomass plants. As in other countries, ENEL has made an FDI acquiring AMP Resources that has added 150 MW of installed capacity in ENEL s portfolio. In 2008, the company ended the construction of a 250 MW wind farm in Smoky Hills, KS; this has been the most relevant wind farm built in Kansas and at the same time, the largest wind farm project made by ENEL. Subsequently, in 2009, two geothermal plants have been inaugurated in Nevada: Stillwater and Salt Wells for a total installed capacity of 65 MW. Figure 7 Smoky Hills wind farm, Kansas 52 abbandona- nucleare- in- francia- avra- rimborso- di milioni/435762/ 67

68 In Latin America, ENEL has wind farms and hydroelectric plants for over 668 MW. It mainly operates in Chile and El Salvador in geothermal sector and is one of the leader in the renewables sector with around 16 GW of installed capacity: 4,4 GW in Argentina, 1 GW in Brazil, 5,6 GW in Chile, 2,9 GW in Colombia and 1,8 GW in Peru. This was the internationalization process that ENEL has followed in order to become one of the most important actors of the world in the electricity power sector; a sector constantly developing and changing thanks to the large amount of research made not only by scholars but also by public companies, and ENEL is one of them The Hofstede s Model administered to ENEL s employee Presenting the Sample When dealing with this kind of research, it is important to start from showing the sample of people interviewed. I ve been in touch with the ENEL s People Care and ENEL s Carbon Strategy divisions - mainly with Mrs. Elena Porcari, Mrs. Iliana Totaro and Mr. Simone Mori that I d like to thank for their support asking the employees to fulfill the survey that the Hofstede Centre provided me. The 65 respondents were also asked to answer some questions in order to present the sample in details. These are the demographic results: 26 males, 28 females and 1 didn t answer to this question. Furthermore, they were asked the age, the years of formal school education (starting with primary school) and the kind of job in order to have a good picture of the employees interviewed. The result is a sample of 65 employees with an age that goes from 25 to 59 years, and the cluster is the mode. It is observable that the education of ENEL s employees is very high since the 71% of the sample has an academic history of 18 years or more (including primary school). Moreover, the kinds of job that are more frequent in the sample are generally trained office worker or secretary and academically trained professional or equivalent (but not manager of people). The last observation surely affects the results of the dimensions but they can still be taken into account, since it was not possible to reproduce the same kind of sample made by Hofstede. 68

69 As will be explained further, the results are in line with those of Hofstede, even if the sample wasn t matched, i.e. people similar on all criteria other than nationality that could systematically affect the answers so the difference in sample configuration is not relevant in this case. In the next exhibits, the statistical data are showed more in details in order to give a better picture of the sample interviewed. Exhibit 1 Statistical Data: Gender. Exhibit 2 Statistical Data: Age 69

70 As showed by the Exhibit 1, women make the 58% of the sample and men make the other 40% 53. The Exhibit 2 shows the age distribution of the sample; as can be seen in the graph, the sample is unequally distributed since the cluster makes the 40% and the other 60% is equally distributed among the other clusters, except for the <20, the and the >60 cluster that scored zero. The next exhibit shows the education and the kind of job covered by the respondents. Exhibit 3 Statistical Data: Years of formal school education (starting with primary school) 53 One employee didn t answer the gender question. 70

71 Exhibit 4 Statistical Data: Kind of Job As showed by the Exhibit 3, the academic history of the sample is mostly of 18 years or more (71%); this statistic is even more important if we take into account the Exhibit 4 looking at the kind of job of the respondents: the main positions of the sample have been the Generally trained office worker or secretary and the Academically trained professional or equivalent (but not manager of people), if we combine the two results it 71

72 is possible to underline an high level of education. For this reasons it is possible to say that ENEL Human Resources managers look for high-skilled people when recruiting. The following exhibits show the actual nationalities and the nationalities at birth of the sample. Exhibit 5 Statistical Data: Nationalities Exhibit 6 Statistical Data: Nationalities at Birth The last two questions of the survey were on employee s nationality in order to understand if people from different countries can affect or are affected by ENEL s culture. The low percentage of foreigners and the anonymity of the survey didn t allow to make this study but, at a statistical and more general point of view, it is interesting to 72

73 note that some foreigners have preferred to change their nationalities and moving steadily in Italy for work purposes. This phenomenon could be seen as a consequence to a culture adaptation that automatically changed the set of the employee s habits and values. If this phenomenon happens often, a different and totally new culture could arise in the Italian community: phenomena like the so-called value conversion, a concept firstly introduced by Thomas R. Rochon that is defined as the replacement of existing cultural values with new ones, or value creation, that is the development of new ideas to apply to new situations, may happen. (Rochon) Power Distance Index (PDI) To determine the Power Distance Index, four questions have been asked: 1. 07) How important would it be to you to be consulted by your boss in decision involving your work? 2. 02) How important would it be to you to have a boss (direct superior) you can respect? 3. 20) How often, in your experience, are subordinates afraid to contradict their boss? 4. 23) To what extent do you agree or disagree with the following statement: an organization structure in which certain subordinates have two bosses should be avoided at all cost? The questions were five-point scaled (for more details, the survey is in the Appendix 1). The answers were collected and the following formula has been applied: PDI = 35 m07 m m20 m23 + C pd 54 T. R. Rochon, Culture moves: Ideas, Activism, and Changing Values, 1998, p

74 In which m02 is the mean score for question 02, etc, and C(pd) is a constant (positive or negative) that depends on the nature of the samples. In this case the coefficient was zero and the final result is: m07 = 1,92 m02 = 1,49 m20 = 3,00 m23 = 2,83 C pd = 0 PDI = 35 1,92 1, ,00 2, = 19 Since Power Distance is defined as the extent to which the less powerful members of institutions and organizations within a society expect and accept that power is distributed unequally, in ENEL the power is felt as well distributed and people feel involved or at least taken into account when decision are made. A table with some characteristics of this value follows: Being counsulted by the boss in decisions is very important Employees agree that an organization structure in which certain subordinates have two bosses should be avoided at all cost PDI 19 Only sometimes subordinates are afraid to contradict their boss Have a considerable boss is utmost important Table 10 ENEL PDI characteristics 74

75 Individualism vs. Collectivism (IDV) To value the Individualism Index, four questions have been asked: 1. 04) How important would it be to you to have security of employment? 2. 01) How important would it be to you to have sufficient time for your personal or home life? 3. 09) How important would it be to you to have a job respected by your family and friends? 4. 06) How important would it be to you to do work that is interesting? The questions were five-point scaled (see Appendix 1). The answers were collected and the following formula has been applied: IDV = 35 m04 m m09 m06 + C ic In which m04 is the mean score for question 04, etc. and, C(ic) is a constant (positive or negative) that depends on the nature of the samples. Also in this case the coefficient was zero and the final result is: m04 = 2,02 m01 = 1,63 m09 = 3,12 m06 = 1,86 C ic = 0 IDV = 35 2,02 1, ,12 1, = 58 As said in the first chapter, individualist societies are those in which the ties between individuals are loose, i.e. a person is expected to look after himself or herself and his or her immediate family only, and Collectivist societies are those in which people from birth onwards are integrated into strong, cohesive in-groups, which continue to protect them throughout their lifetime in exchange for unquestioning loyalty. 75

76 Moreover, a lower value for this dimensions means a collectivistic society while an high value means an individualistic society and since the result is 58, ENEL is somewhat in between those two kind of societies meaning that experiencing a good relationship with other employees is important and spending time with them is seen positively, but at the same time it is also important to have sufficient time for personal or home life. A table with some characteristics of this value follows: Have security of employment is very important Doing a work that is interesting is very important IDV 58 Have sufficient time for personal or home life is very important Have a job respected by the family and friends is of moderate importance Table 11 ENEL IDV Characteristics Masculinity vs. Feminity (MAS) To value the Masculinity vs. Femininity dimension, four questions have been asked: 1. 05) How important would it be to you to pleasant people to work with? 2. 03) How important would it be to you to get recognition for good performance? 76

77 3. 08) How important would it be to you live in a desirable area? 4. 10) How important would it be to you to have chances for promotion? The questions were five-point scaled (see Appendix 1). The answers were collected and the following formula has been applied: MAS = 35 m05 m m08 m10 + C mf In which m05 is the mean score for question 05, etc, and C(mf) is a constant (positive or negative) that depends on the nature of the samples. For this kind of sample the proper coefficient is 20: m05 = 1,95 m03 = 1,69 m08 = 2,83 m10 = 1,86 C mf = 20 MAS = 35 1,95 1, ,83 1, = 63 As said in the first, more theoretical chapter, masculinity stands for a society in which social gender roles are clearly distinct: men are supposed to be assertive, tough, and focused on material success; women are supposed to be more modest, tender and concerned with the quality of life. Femininity, instead, stands for a society in which social gender roles overlap: both men and women are supposed to be modest, tender and concerned with the quality of life. So, the higher the value, the more distinct are the gender roles. With a score of 63, ENEL s employees unconsciously believe, even if not at all, that men are supposed to be more assertive than women while women are supposed to be more tender than men. Moreover, the employees are success-driven, meaning that success is the first important thing, while liking what they do is less important. It is important to underline that this doesn t mean that women cannot be leaders. In fact this kind of bias is proper in communities where this dimension scores very high, 77

78 close to 100, like Japan, where this dimension scores 95 (Hofstede Centre) 55 and women are not perceived as good leaders. However this doesn t mean that in Japan only men can be leaders but longer working hours and dedication to work are needed for women in order to achieve leading positions. A table with some characteristics of this value follows: Having pleasant people to work with is very important Having chances for promotion is very important MAS 63 Getting recognition for good performance is very important Living in a desirable area is of moderate importance Table 12 ENEL MAS Characteristics Uncertainty Avoidance Index (UAI) To value the Uncertainty Avoidance Index, four questions have been asked: 1. All in all, how would you describe your state of health these days? 2. How often do you feel nervous or tense? 55 hofstede.com/japan.html 78

79 3. To what extent do you agree or disagree with the following statement: One can be a good manager without having a precise answer to every question that a subordinate may raise about his or her work? 4. To what extent do you agree or disagree with the following statement: A company s or organization s rules should not be broken not even when the employee thinks breaking the rule would be in the organization s best interest? The questions were five-point scaled (see Appendix 1). The answers were collected and the following formula has been applied: UAI = 40 m18 m m21 m24 + C ua In which m18 is the mean score for question 18, etc., and C(ua) is a constant (positive or negative) that depends on the nature of the samples. For this kind of sample the proper coefficient is 115: m18 = 2,00 m15 = 2,91 m21 = 2,26 m24 = 2,77 C mf = 115 UAI = 40 2,00 2, ,26 2, = 66 As said in the first chapter, Uncertainty Avoidance is defined as the extent to which the members of institutions and organizations within a society feel threatened by uncertain, unknown, ambiguous, or unstructured situations. The higher the value the higher is the fear of indefinite situations. At 66, ENEL s employees need written rules and certain situations to feel good, there s a few need of feeling secure that whatever will happen won t be unexpected. 79

80 A table with some characteristics of this value follows: Employees feel good Sometimes an organization's rules can be broken if it would be in the organization's best interest UAI 66 Sometimes, employees feel nervous or tense A manager should usually have an answer to subordinate's questions Table 13 ENEL UAI Characteristics Pragmatic vs. Normative (PRA) (ex Long Term Orientation vs. Short Term Orientation - LTO) To value the Pragmatic vs. Normative dimension, four questions have been asked: 1. 13) In your private life, how important is doing a service to a friend? 2. 14) In your private life, how important is the thrift (not spending more than needed)? 3. 19) How proud are you to be citizen of your country? 4. 22) To what extent do you agree or disagree with the following statement: Persistent efforts are the surest way to results? 80

81 The questions were five-point scaled (see Appendix 1). The answers were collected and the following formula has been applied: PRA = 40 m13 m m19 m22 + C ls In which m13 is the mean score for question 13, etc., and C(ls) is a constant (positive or negative) that depends on the nature of the samples. For this kind of sample the proper coefficient is 75: m13 = 2,31 m14 = 2,97 m19 = 2,63 m22 = 2,51 C ls = 75 PRA = 40 2,31 2, ,63 2, = 52 As said in the first chapter, Long Term Orientation stands for the fostering of virtues oriented towards future rewards, in particular perseverance and thrift. Short Term Orientation stands for the fostering of virtues related to the past and present, in particular, respect for tradition, preservation of face and fulfilling social obligations. At 52, ENEL s employees are somewhat in between the two kinds of societies and a dominant preference in ENEL s culture cannot be determined; this means that they value both being thrifty but sometimes they can bend the rule and be spendthrift, they re respectful of the traditions but at the same time they can adapt them easily to changed conditions, they re perseverant in achieving results for the long-term but taking into account also the short-term profit made. This result is not so exciting since it is not possible to determine a clear picture of what employees prefer among the short-term and the long-term orientation leaving the possibility to find in this community some pragmatic people and at the same time some others that are, instead, more normative. 81

82 A table with some characteristics of this value follows: Doing a service to a friend is important People agree that persistent efforts are the surest way to results PRA 52 Thrift is of moderate importance People are fairly proud of being citizen of their country Table 14 ENEL PRA Characteristics Indulgence vs. Restraint (IND) To value the Indulgence versus Restraint dimension, four questions have been asked: 1. 12) In your private life, how important is moderation: having few desires? 2. 11) In your private life, how important is keeping time free for fun? 3. 17) Do other people or circumstances ever prevent you from doing what you really want to? 4. 16) Are you a happy person? 82

83 The questions were five-point scaled (see Appendix 1). The answers were collected and the following formula has been applied: IVR = 35 m12 m m17 m16 + C ir In which m12 is the mean score for question 12, etc., and C(ir) is a constant (positive or negative) that depends on the nature of the samples. In this case the coefficient was zero and the final result is: m12 = 3,27 m11 = 2,03 m17 = 3,06 m16 = 2,18 C ir = 0 IVR = 35 3,27 2, ,06 2, = 78 As said in the first chapter, Indulgence stands for a society which allows relatively free gratification of some desires and feelings, especially those that have to do with leisure, merrymaking with friends, spending, consumption and sex. Its opposite pole, Restraint, stands for a society which controls such gratification, and where people feel less able to enjoy their lives. A high score of 78 in this dimension indicates that ENEL s culture is one of indulgence. People in societies classified by a high score in indulgence generally exhibit a willingness to realize their impulses and desires with regard to enjoying life and having fun. They possess a positive attitude and have a tendency towards optimism. In addition, they place a higher degree of importance on leisure time, act as they please and spend money as they wish (Hofstede Centre) 56. As it will be explained better in the next chapter, this is the only dimension that differs by Hofstede s researches, this is probably due to the fact that it has been added to the model since 2010 and it probably needs to be fixed hofstede.com 83

84 A table with some characteristics of this value follows: Moderation, i.e. having few desires, is not so important People usually feel happy IVR 78 Keeping time free for fun is very important Sometimes, other people or circumstances prevents individuals from doing what they really want Table 15 ENEL IVR Characteristics Results overview To sum up, these are the results of the Hofstede Model administered in ENEL S.p.a.: Hofstede Model in ENEL PDI IDV MAS UAI LTO IVR In the next chapter, the Hofstede s results for Italy will be reported and a comparison with this application will be elaborated. 84

85

86 Third Chapter. ENEL s and Hofstede s IBM results comparison Hofstede s results As said in the previous chapters, Professor Hofstede surveyed IBM s employees of 76 different countries, giving different values for five cultural dimensions and making detailed overview for each country. One of these countries was Italy. Making the survey in the Italian s IBM subsidiary, these are the results reported by the Hofstede Centre: Hofstede PDI IDV MAS UAI LTO IVR Exhibit 7 Hofstede's results: Italy It is important to say that Hofstede explicitly advises that these results are valid for Northern Italy and differences in PDI and IDV index are expected; in fact, as we have seen in the previous chapter where ENEL results have been presented, PDI and IDV were lower due to the fact that ENEL s headquarter is in Rome that has a culture very close to the Southern one, even if the Capital is in the center of Italy. 86

87 Differences in IVR index have also been observed, probably because this sixth dimension has been added few years ago to the model and more researches should be done in order to fix it. Analyzing the other dimensions, differences are very low so it is possible to confirm Hofstede s overview on Italian country, an overview that will be reported in next paragraphs Power Distance Index comparison This dimension deals with the fact that all individuals in societies are not equal it expresses the attitude of the culture towards these inequalities amongst us. Power distance is defined as the extent to which the less powerful members of institutions and organisations within a country expect and accept that power is distributed unequally. With a score of 50, Northern Italy tends to prefer equality and a decentralisation of power and decision-making. Control and formal supervision is generally disliked among the younger generation, who demonstrate a preference for teamwork and an open management style. Bear in mind that the high score on individualism accentuates the aversion of being controlled and told what to do. In Southern Italy all the consequences of PDI are often high, quite the opposite of Northern Italy. (Hofstede Centre) 57 In ENEL, this dimension scored 19. This difference is probably due to the fact that ENEL organizational chart is not so complex, as said in the previous chapter there are only eight functional divisions. So, in this community it seems that inequalities among the organizational chart are not felt or accepted hofstede.com/italy.html 87

88 A difference in this value was expected since the same Hofstede ends his PDI overview saying that in Southern Italy all the consequences of PDI are often high, then the management of ENEL had surely taken into account that an high structure would have result in a lower efficiency and structured the organization accordingly. Another reason that can explain this difference could be the fact that the surveyed employees were not so young people and, as said by Hofstede, control and formal supervision is generally disliked among the younger generation. If the sample were younger, PDI value would have been higher. In fact, the 45% of the employees surveyed were lower than 40 years old and the 85% 58 of the sample was lower than 50 years old and this surely affected the answers. All in all, as expected, ENEL employees confirmed that power distance is felt, but the management has done a good job in structuring the organization, making them feeling that every single employee generates value Individualism vs. Collectivism dimension comparison The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people s self-image is defined in terms of I or We. In Individualist societies people are supposed to look after themselves and their direct family only. In Collectivist societies people belong to in groups that take care of them in exchange for loyalty. At a score of 76 Italy is an Individualistic culture, me centered, especially in the big and rich cities of the North were people can feel alone even in the middle of a big and busy crowd. So family and friends becomes an important antidote to this feeling; but the word friend should not be misinterpreted because in business it has a slightly different meaning: someone 58 Aggregate values. 88

89 that you know and can be useful for introducing you to the important of powerful people. For Italians having their own personal ideas and objectives in life is very motivating and the route to happiness is through personal fulfillment. This dimension does vary in Southern Italy where less individualistic behavior can be observed: the family network and the group one belongs to are important social aspects, and rituals such as wedding or Sunday lunches with the family are occasions that one can t miss. People going from Southern Italy to the North say that they feel cold not only for the different climate but also for the less warm approach in relationships. (Hofstede Centre) 59 In ENEL, this dimension scored 58, confirming that the sample is an Individualistic culture, even if the value is lower and so ENEL employees are less me centered. Also in this dimension the geographical position is important. In fact, as said, Central Italy culture is similar to Southern Italy culture and then people are warmer and friendship among employees is important, but family and personal friends come first. The difference in value was expected since the same Hofstede says that this dimension does vary in Southern Italy where less individualistic behavior can be observed Masculinity vs. Femininity dimension Comparison A high score (masculine) on this dimension indicates that the society will be driven by competition, achievement and success, with success being defined by the winner / best in field a value system that starts in school and continues throughout organisational behaviour hofstede.com/italy.html 89

90 A low score (feminine) on the dimension means that the dominant values in society are caring for others and quality of life. A feminine society is one where quality of life is the sign of success and standing out from the crowd is not admirable. The fundamental issue here is what motivates people, wanting to be the best (masculine) or liking what you do (feminine). At 70 Italy is a masculine society highly success oriented and driven. Children are taught from an early age that competition is good and to be a winner is important in one s life. Italians show their success by acquiring status symbols such as a beautiful car, a big house, a yacht and travels to exotic countries. As the working environment is the place where every Italian can reach his/her success, competition among colleagues for making a career can be very strong. (Hofstede Centre) 60 In ENEL, this dimension scored 63, confirming that the community is a Masculine one. Thus, the same overview applies in ENEL s community. This result means that in ENEL s workplace each employee tries to give his/her best in order to achieve good performances, success and promotion. This behavior will surely lead the company to make more value and profits, but at the same time it could be a threat for what concerns the internal stability/sustainability. The value of this dimension, together with the Individualism vs. Collectivism one, means that relationships among employees are mainly the result of a work relationship, brought about for a specific reason i.e. a project or teamwork. Finally, competition amongst employees can easily arise, and this can be a trouble for human resources managers that have to fix and prevent this kind of problems. I suppose and expect that the HR department has studied specific programs in order to keep a peaceful and healthy workplace. Personally, when visiting the building, I ve seen a good workplace; a lot of people were working on their computers alone, but I ve seen people enjoying a conversation too. 60 Ibidem 90

91 3.5. Pragmatic vs. Normative dimension comparison This dimension describes how people in the past as well as today relate to the fact that so much that happens around us cannot be explained. In societies with a normative orientation, most people have a strong desire to explain as much as possible. In societies with a pragmatic orientation most people don t have a need to explain everything, as they believe that it is impossible to understand fully the complexity of life. The challenge is not to know the truth but to live a virtuous life. Italy s high score of 61 on this dimension shows that Italian culture is pragmatic. In societies with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results. (Hofstede Centre) 61 For what concerns this dimension, ENEL surveyed employees scored 52 meaning that a dominant preference in ENEL s culture cannot be determined. It means that in this company it is possible to find both pragmatic and normative people. While the difference between the two values is not so high, it nevertheless is an important matter of fact. Hofstede, administering the survey in IBM, scored 61 depicting the whole Italian culture as a pragmatic one. However, ENEL s employees scored 52, that is somewhat in the middle between a pragmatic and a normative culture. If Hofstede s results were meant to be valid for the whole Italian population, the value should be higher. Clearly, the difference can be due to a difference in sample 61 Ibidem 91

92 compositions. Hofstede interviewed more employees, reducing the marginal error of the results. Probably, if the sample were larger, the result would have been closer to the Hofstede s one. Notwithstanding this difference, the value is still relevant for the 65 people interviewed. It s for this reason that, as will be explained further, the Hofstede model is surely relevant for internal purposes, while expanding the results is somewhat excessive. Further, other dimensions differences will be explained and this argumentation will be more plausibly Indulgence vs. Restraint dimension comparison One challenge that confronts humanity, now and in the past, is the degree to which little children are socialized. Without socialization we do not become human. This dimension is defined as the extent to which people try to control their desires and impulses, based on the way they were raised. Relatively weak control is called indulgence and relatively strong control is called restraint. Cultures can, therefore, be described as indulgent or restrained. A low score of 30 indicates that Italian culture is one of restraint. Societies with a low score in this dimension have a tendency to cynicism and pessimism. Also, in contrast to indulgent societies, restrained societies do not put much emphasis on leisure time and control the gratification of their desires. People with this orientation have the perception that their actions are restrained by social norms and feel that indulging themselves is somewhat wrong. (Hofstede Centre) Ibidem 92

93 This last dimension covers an aspect that is the subject of happiness, the importance of leisure, the importance of controlling one s own life. It is also related to the importance people attach to freedom of expression, which is not always the same across countries. Hofstede s results on this dimension give the idea that in Italy freedom of expression of taught is not important, since for Hofstede, Italian culture is a restraint one. In ENEL, instead, this value scored 78, meaning that the employees interviewed are highly indulgent. The core characteristic of this value is that people in the sample generally exhibit a willingness to realize their impulses and desires with regard to enjoying life and having fun, an overview completely different to what was expected before administering the survey. This huge difference strongly enforces the thesis that this model is perfect for internal purpose and organizational choices, but probably extending the results to the whole population is not possible, even if Hofstede provides a marginal error that must be taken into account. Even if a marginal error is provided, only little differences should arise to validate the model at a country level. Instead, at a more specific level, this model is very useful to Human Resources managers in order to identify the traits of the employees and act accordingly, especially when recruiting, so as to create a workplace where similar people can relate. 93

94 3.7. Overview In this section, Hofstede s overview will be compared with the results of the survey administered in ENEL. As explained in previous sections, differences have been encountered and for this reason ENEL employees culture cannot be related to the picture that Hofstede has depicted for the Italian country. As an example, Hofstede says that Italy is a country in which employees prefer strong hierarchies while in ENEL a flatter organization is foreseen. Moreover, between the two results, there s a strong difference in Indulgence meaning that while Hofstede says that Italian employees tend to be cynic and pessimist in ENEL employees tend to realize impulses and desires in order to enjoy life and have fun. As a consequence, different tips can be given between the two overviews:! In Hofstede overview, acknowledge a leader s power and aware employees that they may need to go to the top for answers are important things to be done by managers;! In ENEL s overview, instead, using teamwork and involve as many people as possible in decision-making could result in better performances.! In Hofstede overview, respecting traditions, rewarding perseverance, loyalty and commitment, avoiding doing anything that would cause another to lose face are behaviors that must be followed by managers;! In ENEL s overview, instead, the behaviors given in the previous point should be matched with other behaviors like being respectful of others and no hesitation on introducing necessary changes. 94

95 Here is a summary of characteristics expressed by Hofstede on the base of his researches and a summary of characteristics valid for ENEL s employees that have been surveyed: HOFSTEDE Centralized companies Strong Hierarchies Larga gaps in compensation, authority and respect High valuation on people's time and their need for freedom An employment of challenges, and an expectation of rewards for hard work Respect for privacy Men are masculine and women are feminine There is a well defined distinction between men's work and women's work Very formal business conduct with lots of rules and policies Need and expect structure Sense of nervousness spurns high levels of emotion and expression Differences are avoided Promotion of equality High creativity, individualism Treat others as you would like to be treated Self-actualization is sought. Tendency to cynicism and pessimism No emphasis on leisure time Control the gratification on desires Flatter organizations Supervisors and employees are considered almost as equals High valuation on people's time and their need for freedom An enjoyment of challenges, and an expectation of rewards for hard work Respect for privacy Men are masculine and women are feminine There is a well defined distinction between men's work and women's work Very formal business conduct with lots of rules and policies Need and expect structure Sense of nervousness spurns high levels of emotion and expression Differences are avoided Willingness to realise impulses and desires Enjoy life and have fun Tendency towards optimism Higher degree of importance on leisure time ENEL Table 16 Hofstede's Italian characteristics vs. Enel's characteristics 95

96 In the following Exhibit the differences in values are graphically showed in order to simplify personal evaluations: HOFSTEDE ENEL PDI IDV MAS UAI LTO IVR PDI IVR IDV LTO MAS Exhibit 8 Hofstede's and ENEL's results comparison UAI 96