Dragons, Camels and Kangaroos. China Cultural Dimensions in International Business

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1 Dragons, Camels and Kangaroos A Series on Cultural Intelligence for Program and Project Management What s the association between these creatures (mythical and real)? The less complex answer is, they are symbolic; Dragons - China; Camels - the Middle East and parts of Africa; Kangaroos - Australia. After three decades of delivering projects globally, and with strong experience in international joint ventures, Bill Young is convinced there is a greater need for the development of Cultural Intelligence. Young lectures in international business management at Beijing s Jiaotong University. In this series, he discusses local and national cultures in the context of their impact on international business and project management. There is an exploration of the concept of Cultural Dimensions and how they can be utilised as an effective tool in building cultural competence. The series includes articles focused on different national cultures and how developing understanding of such cultures can make a substantial difference to achieving successful business outcomes. China Cultural Dimensions in International Business Article 3 in the series Dragons, Camels and Kangaroos By Bill Young The previous articles in this series have outlined the need to build cultural competence as a foundation stone for enabling effective international business and project success in different cultural environments. They emphasized a common aspect in cultural competence: the ability to empathize, understand and respect all national cultures. The second article provided insights into China s cultural disposition to help create valuable context for anyone doing business or developing projects in China. It also outlined the need for business leaders and project managers (in China and beyond) to build culturally competent teams as a primary enabler for sustaining effective international business delivery. This issue s article focuses on how Cultural Dimensions (conceptual constructs that help put into perspective the features of national cultures) can be used to develop an understanding of behaviors and motivations. Knowing what can potentially motivate or de-motivate people in their work activities and environments is useful in building effective integrated business and project teams. The article explores the use of Cultural Dimensions for business applicability, and also considers their limitations. Cultural Dimensions have been extensively researched over the past four decades. Notable researchers have included Geert Hofstede, Fons Trompenaars, and Robert House. Hofstede [1] and Trompenaars [2] separately conducted large studies across international organizations such as IBM and Shell respectively. At times they have differed at times in their positions or 2013 Bill Young Page 1 of 9

2 methodologies but there is much evidence of convergence in their findings and conclusions. House, the initiator of Project GLOBE, galvanised 170 social scientists around the world to undertake separate studies on Cultural Dimensions relating to leadership behavior [3]. This research took nearly a decade to complete. There have been many others who made similarly significant contributions to the development of Cultural Dimensions. China s culture primarily orders how its broader society and commercial sector works. One of the first strategic business steps in such an environment, and it may seem obvious, should be to acknowledge the reality of cultural and related situational differences. As much as globalization has created the modern illusion of everyone being more or less the same, a kind of global homogeneity, this is not the case. This first step is like a vehicle stopping at a stop sign, as opposed to slowing down and rolling through; the latter mode presenting significant risk. The key is to stop and recognise the situation; then to work out what it means, and how it will impact the business / project being conducted. This means developing realistic, as opposed to optimistic, expectations going forward. For example, a project developing budgets or schedules essentially needs to factor in the likely costs, in money and time, that situational (cultural) differences will impose. This is where Cultural Dimensions can be a helpful starting point. Every individual business or project will find different aspects more or less relevant to their context and will need to bridge the gap from general precept to business use. The following are some examples of Cultural Dimensions in a Chinese context. Power Distance This Dimension deals with the fact that all individuals in societies are not equal. This is defined by Hofstede [1], who points to the extent to which the less powerful members of institutions or organisations within a country expect and accept that power is distributed unequally. According to Hofstede s global scoring of different cultures, China has a significantly high Power Distance ranking 80 compared to a world average of 55 (USA is scored at 40, and Australia 36). Scoring with a low or high number on a specific cultural value has no intrinsic meaning in itself; it is not better to be low or high. An individualist society, for example, does not mean a more selfish society than a collectivist-focused society. These scores are simply reflective of a cultural preference or disposition. China s score is indicative of a high level of inequality of power and wealth within Chinese society. This is a contentious issue currently within Chinese political circles: the gaping divide working against their objective of a harmonious society. Much debate has ensued recently to try and correct policy that has resulted, in only a decade or so, increasing disparities in personal wealth Bill Young Page 2 of 9

3 In a business context, it is necessary to recognize that power within Chinese organisations is formal and business structures are hierarchical. Though it can vary in Western cultures, often business structures can be much less formal and hierarchical, reflecting a more societal egalitarianism. Chinese managers care about how things are done. Methodology is important; sometimes even more so than the outcome. This is part of managing for harmony. Indirect communication and consensus in decision-making are primary ways to minimize or, ideally, avoid conflict. Consensus will sometimes be searched out, with differences being massaged in private (discretion being important). In Western culture, consensus is also sought but discussion and adjustment of views is often conducted in a more public fashion. For example, in a Chinese business meeting, the actual big decisions may have already been made prior to the meeting as opposed to Western meetings, where the key decisions get hammered out in the meeting itself. Uncertainty Avoidance This Dimension considers the extent to which people feel uncomfortable or even threatened by ambiguous situations. This dimension focuses on the way a society deals with the fact that the future can never be known, and its responding creation of beliefs and institutions that try to avoid such situations [1]. On Hofstede s global scoring of different cultures, China has a low score of 30 (USA is scored at 46, and Australia at 51). The Chinese appear reasonably comfortable dealing with ambiguity and can be remarkably adaptable. This likely stems from the country s history where in the past the vagaries of relationship strength and connection dictated many of life s social and career outcomes. Though there appear to be two types of Uncertainty Avoidance approaches in China today, perhaps generation-related i.e. the entrepreneurial-spirited, buoyed by the perceived global market opportunities, and those more cautious, more cognizant of the need to keep harmony and protect face. Keeping harmony in regards to relationships is both an Uncertainty Avoidance approach as well as a good risk management / risk mitigation strategy. The Chinese significant deference to authority is often used as a way of avoiding uncertainty: letting the superior make the decisions. Comparable situations in the West would most likely be managed by sub-ordinates. In Western business culture, ambiguity and liability are commonly managed through the provision of contracts. In China, the post opening-up period has seen the commercial contract progressively develop relevance. The value in use of contracts is growing relative to the strengthening legal system and the weakening guanxi (relationship) system. Individualism vs Collectivism This Dimension refers to differing perspectives as to how people in a society integrate into groups or take a more individualist identity. According to Hofstede s global scoring of different 2013 Bill Young Page 3 of 9

4 cultures, the Chinese rank lower than any other Asian society in regard to Individualism scoring: 20, compared to a global average of 24 (USA scores 91, and Australia 90). China s heavily collectivist society is a legacy of its Confucian heritage and Communist ideals. Western societies are commonly far more individualistic in nature. Individuals in such societies see it as their personal responsibility to look after themselves and their direct family or extended family. In this way, they are affectively helping their society function well. In highly Collectivist societies such as China, people belong to in-groups that take care of individuals in exchange for loyalty. Those not in the in-group will experience less support or assistance and less knowledge sharing [4]. Perhaps related to this, is some distrust of strangers, particularly foreigners (a definite out-group ). China has a long history also of being treated less than kindly by outsiders. The younger generation of Chinese, carrying less historical memory, are likely be more open and trusting. In-group considerations affect hiring and promotions with closer in-groups (such as family) receiving preferential treatment. This aligns with Trompenaars defined Cultural Dimension of Performance versus Ascription [2]. Although changing, China's ingrained bureaucracy is still evident in government offices and all but the most entrepreneurial companies. Departments generally tend to exhibit in-group behavior, working quite independently of each other and only sharing selective information; rivalries existing even within the same organisations. Masculinity vs Femininity This Dimension refers to the extent to which achievement and competition are valued versus social relationships and emotions. Masculine societies are more motivated towards wanting to be the best at what they do, and are less motivated by societal values such as caring, nurturing and quality of life (feminine characteristics). According to Hofstede s global scoring of different cultures, at 66, China is primarily a masculine society - success-oriented, driven by achievement and competitive forces. (USA scores 62 for this Dimension, and Australia, 61). These values are reinforced throughout a person s life. Many Chinese will sacrifice family time and leisure priorities for work. Service industry workers, for example, will often work late into the evening, making for little home and family time at the end of their day. Huge numbers of migrant farmers leave their families for long periods of the year to travel to far-off urban centers to obtain better work and pay. Even Chinese students travel to far locations to study (within China and overseas). Emphasis and value being placed on achieving high exam scores a clear indicator of success. Chinese people appear ambitious and achievement-driven by nature: ambition, in this context, meaning motivated to accomplish in a positive way. China s now global openness and recent economic development has promoted entrepreneurship and competition to achieve; which 2013 Bill Young Page 4 of 9

5 aligns with its more masculine cultural characteristic. Taking on greater risk that may bring potential future benefits also ties in with their Long Term View characteristic. Long-Term View This is a later Dimension developed by Hofstede and Bond [5] in the 1990s. It considers the extent to which the future and change are valued and emphasized. Such a perspective is seen as virtuous in terms of controlling one s desires in the short-term for a better outcome in the long-term. It ties directly in with the Confucian value of slow and steady persistence, and perseverance in building for the future. According to Hofstede s global scoring of different cultures, China has one of the highest national Long-Term View scores, at 118. (USA scored at 29, and Australia at 31.) The Chinese often have a different perspective on time than do Westerners perhaps because their culture is thousands of years old. In the West, there is a tendency in the business world to view time as money. Chinese, on the other hand, generally appear calm and patient in business. Time is also seen in a circular manner, in that events and circumstances repeat time and again. Chinese negotiators are patient and can stretch out discussions. Negotiations are often arduous and take longer than anticipated by Western participants. There s the tendency to interpret this as an attrition strategy to wear down foreign negotiators. Westerners with their expectation of more rapid progress, can find such negotiations frustrating. An abundance of patience is essential to success in this environment. Westerners, for example, travel to China, often under tight deadlines, and will not be mindful of the different Chinese business pace. In China, the pace can be fast and slow simultaneously. Chinese negotiators know their foreign counterparts have travelled far with great expectations and will be reluctant to return home without results. Again, this can be exploited by delaying everything until the last minute, in order to create pressure to push things through quickly; often to the disadvantage of the foreign participants. Western companies need to adopt a long-term approach to show they are in the country to stay. They must demonstrate that they are not short-term profiteers aiming to cut and run. Success in China requires relationship building and takes time, requires substantial patience and perseverance, and can come at a considerable cost but the outcomes can be excellent if the process is managed well Bill Young Page 5 of 9

6 Universalism vs Particularism This Dimension relates to what is most important i.e. rules or relationships. Universalist practices refer to activities or things that can be conceived or implemented in a very broad manner, cutting across all manner of boundaries be they national, cultural or other. Particularism thinking focuses on the context and specifics of each particular situation. For example, the restaurant chain McDonalds originally had a strong universalist approach. When the company opened a new restaurant in any part of the world it was a replica of the same physical store and its processes and menus; a burger in Seattle tasted almost identical to a burger in Moscow. However, over the past 15 years or so, McDonalds has taken a progressively more particularist approach, customizing some foods to local tastes. This has enabled the corporation to capture a much greater international market share. Broadly-speaking, Westerners build business activities first and, if they are successful, good business relationships may develop as an outcropping of that activity. This works in societies where there is strong commercial law. The Chinese, conversely, tend to first build the relationship with their prospective business partners; then follow up with commercial transactions. Again, this approach is a likely legacy of Confucianism and pre-opened economy experience, with its historical lack of practical legal remedy for resolving commercial disputes. A business contract is a typical Westerner s (universal) tool to establish up-front the parameters of the commerce or business relationship. These contracts set out all obligations and responsibilities, and aim to create fairness in the conduct of the business. Signing such a contract should symbolize full agreement by both parties to proceed on a given basis. Westerners need to be aware that some Chinese may see such a contract as being helpful only much further along in the business relationship, and then only as a broad guide. How it works will depend very much on the particular context in which the business is being conducted. Signing any contract does not, for their part, confer the same level of importance or finality as it does in a Western context. Chinese may often find it normal to continue the negotiation discussions well into the contract implementation phase. Westerners, understandably, find this unsettling, and it can lead to resentment and mistrust. Some limitations to Cultural Dimensions There are many other forms of Cultural Dimensions (Neutral verses Emotional, Specific v s Diffuse, Achievement v s Ascription, Sequential v s Synchronic, Internal v s External Control, etc.) that can also be analysed for use in various business contexts. But misinterpreting or using Cultural Dimension concepts clumsily or with emphatic expectations can be counterproductive. In spite of the insight they can provide they are still inadequate in being able to fully explain the complex mosaic of differences in cultures. Interpreted wisely, however they are helpful in developing contextual understanding and this can achieve better outcomes in a given environment Bill Young Page 6 of 9

7 In any country, and particularly one with the size and diversity of China, there is no absolute cultural homogeneity [6]. The business culture on the eastern side of China for instance differs considerably from inland areas. Researchers in this sphere of cultural analysis have been criticized for various considered shortcomings in their research. Hofstede s research for example has been challenged in relation to the limitations of trying to score different aspects of national culture; his reliance on the use of surveys as a primary research instrument for understanding culture; the assumption of cultural homogeneity across national populations; nations themselves not being proper units of analysis; the one company approach not necessarily providing the best diversity; political / historical influences not being adequately accommodated; research completed in the 1970s and 80s may now be out of date; too few dimensions identified; and aspects of statistical integrity [7]. As Jones pointed out however, Hofstede s work was ground-breaking when it was undertaken. He noted the rigor and diligence Hofstede applied and the relative accuracy (many replicated and correlated other studies). Hofstede himself stated that Cultural Dimensions are not reified and should not be treated as such [5]. The criticisms of Hofstede s research are made of many other researchers in this field also. There remains much validity associated with his work that can be learnt from. The key with this topic is to use the research information wisely, understanding the context in which it was conducted, and to realise the limitations of its applicability and specificity to different situations. In summary This article focused on how Cultural Dimensions can be used to develop understanding of behaviors which can be applied in an international business environment. It applied a number of Cultural Dimensions to China to demonstrate an in-country context. It concluded by noting the limitations of the Cultural Dimensions research. The next article in the Dragons, Camels, and Kangaroos series will continue the focus on China, investigating in further detail the high failure rate of international businesses and projects, particularly joint ventures. It will offer suggestions as to how such situations can be turned around, and at what point that intervention should take place Bill Young Page 7 of 9

8 References 1. Hofstede, G., Culture's consequences: comparing values, behaviors, institutions, and organizations across nations, ed. 2nd2001: Sage. 2. Trompenaars, F. and C. Hampden-Turner, Riding the Waves of Culture: Understanding Cultural Diversity in Global Business, ed. 2nd1998, New York: McGraw-Hill. 3. House, R.J., et al., Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies2004, Thousand Oaks, California. 4. Chow, C.W., F.J. Deng, and J.L. Ho, The Openness of Knowledge Sharing within Organizations: A Comparative Study of the United States and the People's Republic of China Journal of Management Accounting Research, (1): p Hofstede, G., Dimensionalizing Cultures: The Hofstede Model in Context. International Association for Cross-Cultural Psychology: Theoretical and Methodological Issues: Subunit 1 Conceptual Issues in Psychology and Culture, Article 8, Tung, R.L., The cross-cultural research imperative: the need to balance cross-national and intra-national diversity. Journal of International Business Studies, : p Jones, M., Hofstede Culturally questionable?, in Oxford Business & Economics Conference2007: Oxford, UK. Note: is a series of articles on international cultures and cultural intelligence for project and program managers by Bill Young. The monthly series was launched in January Bill Young Page 8 of 9

9 About the Author Bill Young PhD, MBA, M.Eng, B.Eng, CPPD, FIEAust, FAIPM. President - Asia Pacific Federation of Project Management ( current). Past President - Australian Institute of Project Management ( ). Based in: Melbourne and Beijing: <bill.young2010@gmail.com>. Bill has worked for 31 years in engineering, business, and project management responsible for a diverse range of chemical processing and mining developments. He has worked in Australia, Europe, Asia, North America, and Africa. After completing a number of Projects in China since 2005, he moved to China with his family in He is a consultant and entrepreneur, and a Professor (part time) for the School of Mechanical & Electronic Control Engineering, Beijing Jiaotong University 2013 Bill Young Page 9 of 9