This case tells us about Stanley Wong, division manager for Erie Performance Polymers and general manger of Wuhan Erie Polymers joint venture who had received an approval for his transfer request to Gary, Indiana, USA, headquarters of Erie. He was given the task of recommending to the board, from a list of six candidates, a successor to his position. During his tenure Stanley Wong has tried to modernize the thought process of his mainly Chinese employees, at the same time being sensitive to the cultural differences, he tried to create an organisational culture which was a mix of both Chinese and western values. He must make sure that his successor is sensitive to the existent differences in culture and that he is well equipped to handle problems or conflicts which these differences might cause.
NOMINATION OF SUCCESSOR (Q1)
After considering the six candidates it can be said that all of them six have certain shortcomings and none can be considered ideal for the job, however Bruce Po would probably best suit this position since he possesses several important qualities required for succeeding in this position. Wright and Mischel (1987) have stated that predictable behaviour would be achieved when management practices would be congruent with national cultural values which according to Earley (1994) would further result in high performance. According to Perlmutter (1969) polycentric firms are those, which, by experience or by inclination of the top executive begin with the assumption that host country cultures are different and that foreigners are difficult to understand (p11). Perlmutter (1969) further states that local people know what is best for them and the part of the firm which is located in the host country should be as local in identity as possible.
Bruce Po is a national manager and possess’ the advantage of having the knowledge of the local business scene (Scullion & Collings, 2006). Being fluent in Chinese and having a good understanding of Chinese culture and traditions, he will be able to not only communicate and motivate his staff efficiently but also socialize and maintain good relations with government officials, which is required for this post. Governmental policies favour appointment of HCN managers (Dowling & Welch, 2004). Wilson, Bernadin and Russel (1998) have concluded that the failure rate of PCN managers is also high compared to HCN managers. Appointment of Po would satisfy the need to appoint a host country national (HCN) as the manager. Po has shown in the past that he is capable of making crucial decisions much needed for this managerial post.
He is intelligent, committed and hardworking and will successfully be able to implement modern business techniques which he is currently learning. The current scenario requires a manager who can ensure that the subsidiary has a similar corporate culture and shares similar values of the main firm to maximise productivity using socialization must to assert control, much like a ‘bumble–bee’ (Harzing, 2001). Po lacks networking skills with the head quarters and might fail to assert the required amount of control. The Chinese have shared the tradition of respect for elders for many generations (Wales, 1946). Po, being only 32 years of age might not be able to command that respect from his colleagues.
AREAS WHERE CROSS-CULTURAL CONFLICTS MAY ARISE AND RECOMMENDATIONS TO SOLVE THESE CHALLENGES (Q2)
According to Choi and Beamisch (2004) conflicts could cause substantial problems to a company and cultural conflicts may further complicate the process. Large cultural differences would increase the difficulty for the involved groups to understand each other’s point of view. To get a better understanding of the cultural differences between the two nations lets take into account the research done by Hofstede (1984). Hofstede (1984) developed and named 5 dimensions, which best characterised a culture, enabling us to make a comparison between cultures. These five dimensions were individualism, power distance, uncertainty avoidance, masculinity and long-term orientation (Hofstede, 1984). Chinese differ substantially with respect to individualism, long term orientation and power distance when compared to the Americans (Geert-hofstede.com, 2014). These differences could result in conflicts in the following areas:- Intercultural communication
Problems often occur due to misunderstandings, which come up as a result of cultural differences in methods of negotiation and handling conflict (Adler, 1986; Adler and Graham, 1989). The Americans who are associated with individualism believe in confrontation while the collectivist Chinese try to avoid conflict and heated arguments (Hofstede, 1984). This could lead to misunderstandings when the two parties communicate. For example the Americans might think that silence from their Asian colleague is a sign of consent when actually it isn’t.
The Chinese might misunderstand their American colleagues’ arguments and confrontation as lack of respect. Even in negotiation, which is the two sided exchange of signals between parties, people from different cultures interpret signals differently; negotiators might thus misread the signals or transmit an unmeant message. Thomas & Pondy (1977) have suggested that often ones words, facial expressions, body language and speech lead to attributions of intent that could cause conflict. Augsburger (1992) further stated that this phenomenon runs rampant in cross-cultural communication. Adoption of modern business practices
Its observed that collectivist values are more suited for agrarian economy and are very different from the individualistic values which encourage more openness, conflict and innovation (Chen, Tjosvold and Pan, 2010). It is important for organisations to adopt modern business techniques in order to compete in emerging global market. Individualists are more up to date and endorse modern management ideas while collectivists don’t (Hofstede, 1984). These differences in individualistic and collectivist values of the two culture could lead to hindrance and conflict with regards to adopting modern business techniques (Inkeles and Smith, 1974).
Selling price decisions
Taking into consideration the fifth dimension, which is long-term orientation. The Chinese and the Americans have a different mindset when it comes to running a viable business. The Americans use long term strategies to achieve their goal while the Chinese aim for quick profits. The Chinese focus on cutting edge prices and on getting in and out of the market fast. Discussing selling price and decisions on future prospects could lead to conflict escalation due to differences in ideology. Conflict management is vital in a joint venture but to prevent conflicts by clear initial agreements and open communication is preferred. Cultural distance has been defined as ‘…basic differences between cultures, such as value systems, beliefs, customs and rituals in addition to legal, political and economic systems’ (Cao, Hirschi and Deller, 2012, p. 167).
According to Tung and Verbeke (2010) the first step in overcoming uncertainty and its consequences is managing this process with an understanding of cross cultural relations. Zhang, Y., Harwood, J. and Hummert, M. (2005) have stated that misunderstandings related to cultural differences can be avoided and performance can be improved by applying effective conflict management in the joint venture. Cultural awareness and cultural value systems must be put in place to overcome misunderstandings. This will help two parties to understand each other better (Tang and Ward, 2003). In a joint venture it is important that both groups understand each other’s point of view.
This will lead to a mutual understanding between the parties enhancing trust and communication and reducing the chances of a conflict. Conflicts cannot always be averted, some need to be addressed. Conflict management approaches must be used to deal with these conflicts. Blake and mouton (1964) have stated two conflict management styles, the accommodating approach and the avoiding approach. The accommodating approach is when concern is shown for the other group. This conflict management method is appropriate due to the fact that reaching common objectives are in the best interest of the joint venture. Finally Conflict management is a skill that can be taught and developed. It must be taught to specialists in the human resources section.
CHALLENGE IN ATTRACTING, RETAINING AND REWARDING INTERNATIONAL TALENT (Q3)
Reiche (2007) states that retention of valuable employees is a critical strategy for HR managers and organisational leaders in order to survive in the long term and achieve competitive advantage in the global economy. Senior executive selection and retention is of prime importance since they are responsible for overall direction and scope of business activity. The retention of intellectual capital is of growing strategic importance (Tymon, Stump and Doh, 2010) and there has been a growing interest among organisations, practitioners and academics (Scullion, Collings and Gunningle, 2007). Asian countries have particularly faced significant problems with respect to employee retention despite their economic growth in recent years (Barnett, 1995). It was important to choose a successor who could motivate his employees and encourage them to be a part of the organisation for longest possible time. Stanley would also have to take into consideration the candidates ethnicity, since to work and live in china might prove quite difficult for expatriates and they might end up leaving.
Employee retention benefits both the organisation as well as the employee because organisational performance is a product of individual performance (Pfeffer and Sutton, 2006). In order to retain employees companies provide training and mentoring to their top employees which would help them broaden their skills (Groysberg, Nanda and Nohria, 2004). Wong’s challenge is to communicate clearly the possibilities for future training, development, and career progress which is a crucial part of a successful retention strategy (Lasserre and Ching, 1996) The successor must have good team work skills since it is observed that team work allows greater employee participation and increases organisations performance which influences motivation and satisfaction of employees (Nel et al 2002). This would lead to employee retention. Job satisfaction is very important in order to ensure that the successor retains his position for a long time. Autonomy, good relations with co-workers and working conditions are factors which influence job satisfaction.
In china it is very difficult to maintain good relations with co-workers if you cant communicate in Chinese. Managers who might not be able to speak Chinese might not be satisfied with the job since they would not be able to communicate and maintain relations with their co-workers. The reward system is strongly influenced by economic and social factors. According to Schhuster and Zingheim (1992) designing of the reward system must be done strategically in a way to reward results and behaviour, which are consistent with goals of the organisation. WEP must use the total reward approach, which takes into consideration the totality of extrinsic/intrinsic and transactional/relational rewards in reward design (Thompson, 2002). The challenge that Wong faces is to shape reward systems such that they balance the needs and desires of HCNs, PCNs and TCNs (Fisher, Schoenfeldt and Shaw, 1999). He must make sure that he motivates his employees by ensuring that compensation is given to skilled employees who achieve their targets and make international business operations succeed (McNally, 1992).
Harvey (1995) identified the problem that compensation was different for HCNs and expatriates. Often expatriates make more money than HCNs who might have a job of equal or more importance (Harvey, 1995). This might make the HCN employees feel like they are being treated unfairly (Fisher, Shoenfeldt and Shaw, 1999). Wong faces the challenge of trying to create a somewhat equal compensatory system. He must tailor rewards to fit the Chinese culture.(Westerman, Beekun, Daly and Vanka, 2009). Wong must consider the balance sheet approach, which facilitates mobility among expatriate staff in the most cost affective manner (Reynolds, 1995).
This approach is considered expensive and complicated. Phillips and fox (2003) have stated that this is not an effective means of attracting and retaining the best expatriates. An alternative approach would be the going rate approach, which is primarily based on host country market pay rates (Dowling, Welch and Schuler, 1994). A good reward system could attract, retain and motivate employees. It is important for WEP to offer special benefits such as housing provision and cost of living allowances to attract expatriates. Benefits were found to be an important component in encouraging prospect expatriates to accept international assignments (Konopaske and Werner, 2005). Job applicants are attracted to organisations that fit with their personal values (Kristof, 1996).
To conclude we can say that Stanley Wong has numerous factors to take into consideration before nominating a successor. Neglecting cultural differences, dependency on the other partner and unresolved conflicts could lead to termination of the joint venture (Kemp, 1999). With a large increase in globalization rate over the years in order to create an environment in which workers are able to communicate and achieve common goals, it is important that multinational organizations learn to integrate diverse value systems and engage global work values (Rosenblatt, 2011; Erez and Drori, 2009; Ralston, Holt, Terpstra & Kai-cheng, 1997).
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