When Pascal made this statement, globalization had yet to take place. People lived in different societies remaining cut-off from each other. Each society had its own perception of truth and reality. Then came along the advancement in technology bringing along inventions such as computer, internet and telecommunications making the world a global village. Perceptions started changing as information flow across the globe happened at the speed of light.
People from all across the globe started sharing their experiences with each other thus reducing the differences in various cultures. However, the act of globalization has yet to reach its peak. Cultural differences still exist within different societies and the level of information and technology is still heterogeneous around the globe. I would now highlight some distinguishing features of the management styles of various regions.
We observe that the beliefs and values of people vary across various cultures. The Japanese work as a group and organizational system is based on community work. The reward system is based on the level of seniority and is also group based. The organizational structure is cooperation based whereas American organizations often are based on competitive style where individuals are rewarded based on their performance levels. Similarly the management style of French is also very different from that of US.
French follow a more creative thinking pattern and do not like to adhere to strict rules and regulations. The European management style has some key points that distinguish it from the American management style. The European management style even differs within the European countries and two countries deserve a special focus — France and Germany — because, among other reasons, the bureaucrats in those countries have long been regarded as “mandarins” by the field of public administration (Dogan 1976).
European management style can be classified into different clusters based upon Hofstede’s cultural dimensions and Trompenaars and Hampden-Turner’s cultural variables (Goliath, 2004) according to which European management style can be sub-divided into: Anglo-Saxon culture (Ireland, UK, and USA), Nordic culture (Denmark, Norway, Netherlands, Sweden, and Finland), Germanic culture (Austria, Belgium, Germany, and Switzerland), Frankophile culture (France, Greece, Portugal, and Spain) and Italian culture. These cultures also differ greatly from the US and Japanese styles of management thus requiring different management practices.
The pay for performance system can work with the European management style as employees in Europe are mostly achievement oriented and perform good work for better rewards. The cultural beliefs and values of Europeans are pretty much different from the people of US and hence the marketing techniques used in Europe should be different from those applied in US. For example, Europeans are very much reluctant to providing personal information as compared to US customers; also the credit card usage in Europe is considerably lower than in US (Heilbrunn, 1998).
The introduction of new logo and implementation of matrix structure allowing a flatter organizational structure can work relatively better in the European business environment The company operations in South America demand a completely different approach as Latin American culture significantly differs from US culture in terms of communication process. The US culture emphasizes on completion of task and sentences are interpreted in their direct meaning. However Latin American society focuses on relationships and context of the communication may involve more than just the spoken words (Wederspahn, 2001).
So the marketing and sales efforts in South American cannot be standardized with the US practices since the Latin American customers tend to perceive communication messages in a very different way from their US counterparts. The new logo can be introduced, however introduction of a flatter organization with matrix structure may not be feasible in South America as the type of culture prevalent in this society is not conducive to the working of non-hierarchical organizations. If we study the culture of Middle Eastern countries, it is found that the business practices again differ significantly from those of US.
The business is mostly chaotic and based upon word of mouth rather than written agreements, the cultural values are mostly Islamic and respect for relationships is held supreme; also the marketing regulations in Middle Eastern countries are very strict as compared to US or rest of the world (Kwintessential Ltd). The middle eastern management style is mostly authoritarian and based upon Douglas McGregor’s Theory X motivational leadership style (Daniel Workman , 2008). Thus employees have little or no motivation to work on their own and will perform only when directed by the superiors.
Thus bright managers from US and other Western states often try to avoid working in Middle East and so they must first be provided proper cultural training in authoritative styles thus enabling them to adapt to the management practices of the Middle East. The Australian business is more similar to that of US as compared to the rest of regions as described above. The language and dress code is pretty much similar. However, Australian society is strictly based upon egalitarian principle where nobody like being bossed around. People don’t like to consider others as superiors and there is almost no hierarchical system (Slideshare, 2009).
So authoritarian style of management will not be welcomed in the Australian business. The meeting and negotiation styles as well as the general beliefs of the Australian society are pretty close to the American beliefs. However according to a study on behavior of 35,000 managers from Australia and New Zealand, the Australian managers consistently try to avoid responsibilities and do not take initiatives (Gettler, 2002). Thus FES should provide cultural and leadership training to Australian manager before implementing any kind of central strategy.
Discrimination issues also prevail in Australia that can make life for foreign managers very difficult. However, recently steps have been taken to strongly implement anti-discrimination laws. The roles of front line managers are also changing in Australia as they are provided more and more freedom and responsibility (James Saville, & Mark Higgins, 1994). The sales and marketing strategy in Australia can be aligned with the US strategies relatively easily because of the similarity in both societies. So the dilemma of FES is choosing between centralized and decentralized approach.
Centralization can be defined as, “the degree to which decision-making authority is kept at top levels of management. ” while Decentralization can be defined as, “the degree to which decision making authority is pushed down to lower levels of the firm” (Schilling 2008). Both approaches have their own pros and cons. FES has seen tremendous growth over the years and has been expanding into new regions at a very quick rate. Thus the organization requires a large amount of flexibility in its decision making that can be provided by a decentralized approach.
However, due to rapid expansion, the organization requires tighter control of finances and close monitoring of all its operations to reduce costs and maintain quality. These measures can be achieved through a more centralized approach. So what approach suits FES bests can be determined by a cost benefit analysis where each advantage and disadvantage of delegation authority has to be carefully analyzed in light of the company objectives. Thus aligning the decision making process with the vision of the organization.
A centralized approach can benefit the organization by significantly reducing the administrative cost related to employee management. Infrastructure handling will also be more efficient and it will be easier for the headquarter to align organizational goals with the functional and departmental goals ( Dezaree Seeds, & Alan S. Khade , 2008). Centralized approach will also make reporting procedure simple resulting in standardized organizational policies. Thus in this way it will further help the organizational objective of flattening the organizational structure and in creation of a matrix organizational setup.
A decentralized approach on the other hand can benefit the organization by providing flexibility and empowering employees at the divisional and functional level. As explained above, different regions in which FES is operating have different working environments and the condition of energy industry in Europe, Australia, Middle East, US and South East Asian regions are very different from each other. Thus decentralization of HR and marketing policies will allow the organization to cater to the customer needs in the ways most suited to specific regions.
It will also allow greater local control and the ability to act quickly to gain local resources ( Dezaree Seeds, & Alan S. Khade , 2008). Decentralization will also allow the organization to better deal with the cultural diversity and provide training to the employees as and when the need arises. “One thing that business, institutions, governments and key individuals will have to realize is spiders and starfish may look alike, but starfish have a miraculous quality to them. Cut off the leg of a spider, and you have a seven-legged creature on your hands; cut off its head and you have a dead spider.
But cut off the arm of a starfish and it will grow a new one. Not only that, but the severed arm can grow an entirely new body. Starfish can achieve this feat because, unlike spiders, they are decentralized; every major organ is replicated across each arm” (Beckstrom and Brafman 2008). The type of approach taken by FES depends upon the nature and present condition of the global energy industry. The energy industry around the world is in a continuous state of flux. As more and more energy companies around the world become private and become free from the control of state, the nature of competition is changing (ExxonMobil, 2004).
Demand for power is increasing at an exponential rate and the competition from private as well as government owned companies is fierce. In the power generation sector, each country has established different laws and tariff rates for multinational organizations. Thus on a whole it seems wiser to maintain a decentralized organizational setup which is flexible enough to quickly respond to the changing conditions of the industry. FES should maintain its present functional structure by keeping the finance, production and HR departments centralized.
However using the same marketing and sales techniques all across the globe has a lot of negative implications. Thus allowing the regional marketing departments to work according to their specific environment is the best possible option. So in order to maintain decentralization in the marketing and sales department, the top management has to establish strong ties with all of its regional departments. A strong organizational culture based upon a clear vision and mission of the company should be communicated to all of its employees.
Perhaps FES can create a hybrid model which allows centralization of decision making with respect to financial and important managerial decisions and at the same time, the marketing campaign is allowed flexibility according to the specific needs of the region. A key concern for FES is to harmonize its rapid global growth. Power and gas generation has to be taken in new countries and new plants need to be setup. The international operations have expanded a lot and efforts must be made to consolidate the existing business while growing in new regions of the world.
As part of the consolidation effort FES must conduct extensive employee training program instilling in each employee the vision and objective of the organization. The company should consolidate its major decision making power in the Headquarter thereby allowing Headquarter to maintain a close monitory system on all of its subsidiaries. By centralizing its finance and management activities, the company can also approve marketing budgets for different regions from its Headquarter, thus building coherence in the finance and marketing goals.
However the marketing and sales strategies for each region should be decentralized thus instilling greater flexibility and freedom among marketing departments to cater to their local markets. The pay for performance system can work smoothly in few of the regions but as explained earlier, some regions such as Middle East and some parts of South East Asian cultures demonstrate a more hierarchical structure and it will be extremely difficult to introduce pay for performance system in these regions.
Also the parameters should be clearly defined before introducing the pay for performance system in different regions. Because same results usually do not show same amount of performance in different regions. What kind of performance and what kind of pay should be decided and communicated to all regional offices. The parameters for monitoring performance should be based upon different standards for different regions. Similarly some of the major HR policies should be centralized but mostly HR of each region should be independent in choosing the who, what, when and where about its employees.
For example, Middle Eastern region is very warm in summers as compared to the European region and the work habits and optimum level of work during different seasons is different for both these regions. Thus separate working policies should be established for each of the region. The R&D department should remain centralized at the American Head Office. As a centralized R&D approach is more beneficial for a company like FES which has not expanded business into a variety of categories (AB, 2001).
However taking technological inputs from all across the globe may help the R&D department in improving its efficiency and effectiveness. Thus technological integration should be built where all global units of FES are directly integrated with its Head Office and the information flow between Head Office and different regions should be quick and efficient. The production department should carry out its role from the center, managing the manufacturing process across the globe from the Head Office. So it can be seen that different aspects of FES operations require different level of centralization and decentralization.
Also different regions require different level of authority delegation based upon their internal environment and national cultures. It is relatively easier to introduce standard policies in Europe and Australia as both of these cultures are very similar to that of US. However, standardizing procedures across Middle East and South America is not a feasible option. The regional business units should remain decentralized as there should be some form of flexibility to make the decision making process quicker.
The regional heads should be sent directly from the Head Office, however if some regions in Middle East are not being managed effectively by American managers, then leadership services of local managers should be availed after providing them extensive cultural training programs at the Head Office. The regional units should be linked to the Head Office through the fastest technology available so that there is no or little information gap between the center and regional units.
Thus in light of the cultural differences prevailing in various regions of the world, the best suited approach should be to take a hybrid approach while showing some restrain in application of a centralized approach and making some variations in the standards for implementation in different regions. The integration of overall business can be achieved by proper use of technology and defining proper hierarchical system for flow of information between Head Office and various regional units.
Courtney from Study Moose
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