International Business Chapter 6 Homework The role of senior management is critical when it comes to helping females succeed abroad in expatriate roles

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International Organizational Behavior 2e Chapter 6 Page 1

CHAPTER 6

MANAGING DIVERSITY IN MULTICULTURAL

TEAMS AND INTERNATIONAL PARTNERSHIPS

CHAPTER INTRODUCTION

I hope that someday it will be more colorful and prettier, too.

Whoever wants it to be more colorful or prettier should go to a flower

meadow or a museum. I wish Mr. Ackermann were as ambitious regarding

the advancement of women as he is regarding issuing returns [on the

bank’s stock].

Ilse Aigner, Minister for Consumer Protection, Germany

Issues related to diversity are viewed differently across countries. Diversity issues are sensitive

and complex. Managing diversity in a cross-cultural context includes assessing the impact of

heterogeneity in national, cultural, and ethnic backgrounds on employee morale, cohesiveness,

and communication. It also includes determining how to best promote women and their careers

International Organizational Behavior 2e Chapter 6 Page 2

CHAPTER REVIEW OUTLINE

MANAGING DIVERSITY: SENSITIVE AND DIFFICULT CHALLENGES

When companies cross borders, they may run afoul of cultural norms related to diversity, but

they may sometimes be able to hire better local employees because of local sensibilities about

diversity. Consider gender issues related to diversity in Japan compared to Europe and the U.S.

Gender discrimination has been illegal in Japan for more than two decades but laws are not

I.Diversity Challenges Facing Expatriates

American firms face diversity challenges in doing business abroad. Laws that make it illegal

for U.S. companies to discriminate against Americans on the basis of sex, race, ethnicity,

Some American and European managers believe that they should not send females to certain

foreign locations as expatriates because of a perception that the cultural environment in some

nations makes it difficult for them to be effective in expatriate roles. (e.g., Saudi Arabia)

The reluctance of some U.S. firms to send women or minorities into “harm’s way” as

expatriates carries legal risk given American law, particularly if the stated reason is simply to

avoid clashes with local sensibilities. Females are a growing part of the expatriate population

globally (perhaps 25% today compared to 10-15% in years past).

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The role of senior management is critical when it comes to helping females succeed abroad

in expatriate roles. Here are four sets of suggestions for managers to consider for women and

any potential expatriates who might encounter diversity-related issues abroad due to race,

ethnic background, or religion:

• Avoid stereotypical assumptions when choosing expatriates – Never assume people

are disinterested in foreign postings or that they will be crippled by local perspectives.

Women should receive serious consideration for foreign assignments. These steps

help eliminate inaccurate views about placing female expatriates in “harm’s way”.

• Offer ongoing support overseas – Too often company support ends with pre-departure

training. Training on diversity and related issues should continue for at least several

months into the foreign posting. Female expatriates can use such training as a

platform to present especially difficult problems or unexpected challenges. Firms

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II.Corporate-Level Approaches to Managing Diversity

How do firms cope with various diversity issues across literally dozens of nations?

Multinational firms face the challenge of managing cross-national diversity (employees from

the parent country and other countries interact) and intra-national diversity (employees from

the same country who represent different races, ethnic groups interact). Stakes are high since

diversity offers tremendous benefits if managed properly, and damaging costs if not. These

potential benefits and costs are summarized in Table 6.2.

III.Cultural Diversity in Teams: Challenges and Solutions

Some of the thorniest diversity challenges that international managers face involve teams of

employees from a variety of cultures and countries. One of the biggest mistakes that

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A. In the Trenches with Multicultural Teams

Teams are the fundamental building blocks of organizations. There are work teams,

cross-functional teams, and management teams, virtual teams that use their pooled

knowledge and efforts to synergistically accomplish better outcomes for a vast variety of

B. Culture-Driven Differences in Team Behavior

Multicultural work teams may eventually yield benefits (e.g., more creative problem

solving), their diversity also comes with costs, including higher task conflict often driven

1. Decision-making norms that diverge or conflict. Multicultural team members

have different views about how much analysis (quick or extensive) needs to be

done before decisions are made.

2. Different views about hierarchy. Members from different cultures may have

attitudes about status that lead to divergent expectations about how team members

should be treated, with equality, or with deference.

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4. Language fluency problems. Culture is also linked to team members’ primary

language. Team members not fluent in the primary language used by the team will

Table 6.4 summarizes common problems found in multicultural teams along with four

Managers should carefully assess problems confronting a particular multicultural team

and the background conditions accompanying it. Such assessments are critical for

determining which approach has the best chance to succeed given the circumstances.

Assessing context differences is also essential for shaping the nature of broader

interventions aimed at instituting high performance work systems across cultures.

• Management intervention – a manager steps in to make a decision to solve or prevent

problems in multicultural teams. The downside of such an intervention is that team

members may not learn all that much and eventually become dependent on

management to solve their problems. Managers may want to preempt this by

intervening early in the life of a multicultural team to establish norms and

expectations. This stage-setting can prevent some cultural differences from spiraling

into major problems later.

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B. Cultural Differences in Social Loafing

Another culturally-driven phenomenon that occurs in groups and defies easy categorization is

“social loafing.” Studies conducted within the U.S. have repeatedly shown that people are

more productive when working alone than when working in groups. Apparently, people

“loaf,” or slack off, because they assume the group will get the job done anyway and because

they can then redirect effort toward their own goals, be it relaxation or something else.

Social loafing research suggests that managers must be careful when introducing group-

based incentives with teams in collective cultures. Since the type of group in which

collectivists work impacts performance, it is best to form teams around natural collections of

employees (i.e., existing in-groups) to maximize the effects of group incentives in collective

environments.

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C. Using Cultural Diversity to Your Advantage

The composition of a diverse team tends to impact its initial performance—the greater the

diversity (based on characteristics such as gender, age, and/or culture, etc.), the more

difficulty the team will have. More diverse teams have bigger headaches while

communicating, more difficulty building unit cohesion, and more trouble setting up an

Studies have found that homogeneous teams initially outperformed more diverse teams, but

were surpassed later. Part of the challenge with diverse teams is that people from different

cultural backgrounds have divergent views on what it means to work in a group or team. The

following are some guidelines for managing diverse multi-cultural teams:

• Explicitly recognize cultural differences – Do not minimize or overlook cultural

differences. Encourage team members to recognize and embrace such differences.

This will help team members move toward greater understanding and, eventually,

openness to what different cultural perspectives can contribute to tasks at hand. This

technique must be used with care since it may exacerbate existing differences and

create “fault lines” within the team.

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• Recognize that reactions to training may differ around the world – While providing

diversity training can help multicultural teams succeed, firms should understand that

team members may respond differently to training because of their cultural values.

People from individualistic countries tend to be more accepting of diversity training

and willing to embrace trainers from different backgrounds. People from collectivistic

nations seem to respond best to trainers from collectivistic cultures. Care needs to be

taken when introducing training to multi-cultural teams to produce maximum

acceptance.

D. Summary of Diversity in Teams

Benefits of team diversity take longer to manifest, partially because diversity increases the

INTERNATIONAL PARTNERSHIPS: MANAGING DIVERSITY, COMPLEXITY AND

COORDINATION

This section of the chapter addresses complexities and cultural challenges associated with

international partnerships between firms, management decision-making processes that lead to the

formation of new partnerships and alliances, and the developmental stages that international

firms often go through along the way.

I. Bridging Barriers in International Decision-Making

Management processes that facilitate strategic decision making are critical if international

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A. Formal and informal mechanisms

Formal mechanisms, such as strategic planning teams, are specifically created by the firm

to serve coordination and related needs. Many types of formal coordination mechanisms

exist. Some multinationals put together teams of managers from various units to

coordinate efforts across countries and improve information exchange. Others assign

managers to serve as liaisons between business areas and geographic areas.

B. Creating buy-in with the strategy development process

Many multinationals have trouble making their coordination mechanisms whether formal

or informal, work well. This difficulty can often be traced back to mistrust between

headquarters and subsidiaries around the globe—something that top-down strategy

development tends to exacerbate. This can be avoided if firms use processes perceived to

be “fair” when creating international strategy. A fair process ensures more cooperation

from local subsidiary employees and helps strengthen relationships over time, especially

when a new strategy involves change. To have a fair process, executives from

headquarters must:

1. make significant efforts to familiarize themselves with foreign operations;

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Table 6.5 captures this process in detail. By engaging local employees, fully explaining

decisions, and clarifying expectations, executives can improve local employee trust in

headquarters management.

II. Toward Partnerships and Alliances: Stages in International Development

Many important decisions companies make involve how to grow their international

operations. Consequently, it is useful to understand how firms develop internationally over

time. Historically, firms gradually expand their international reach in distinct stages as their

A. Developmental stages:

o Stage 1 – Exporting – Many domestic firms begin internationalizing by exporting.

They may rely on an export manager or use consultants to provide the expertise

o Stage 2 – Sales Subsidiaries – As foreign sales grow, firms may start using

distributors or representatives abroad to promote products and provide service. L.L.

o Stage 3 – International Division – Today, Harley-Davidson is arguably in Stage 3,

which involves assembly or manufacture of products overseas. Harley–Davidson’s

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o Stage 5 – Global or Transnational – Stage 5 firms ignore geographic boundaries—

they build product, source materials, and hire talent wherever it helps reduce costs

and maximize returns. Computer-peripherals maker Logitech International has two

headquarters (Silicon Valley and Switzerland) but locates its senior manufacturing

executive in Taiwan so faster decisions can be made about component sourcing.

Managing in this environment requires flexibility, the ability to bridge cultural

differences, interdependence across units, and a global perspective that still allows for

location-specific tailoring of products or services.

B. Multinationals from Developing Countries: An Alternative Road

These international development stages will not apply to every firm. Many multinationals

from developing countries have traveled a different evolutionary road. They

internationalize fast and come from countries with inadequate business infrastructures,

weak intellectual property protection, and opaque legal systems. Coming from tough

III. International Partnerships: Making Choices and Managing Challenges

How do companies decide which foreign firms will make the best partners in the first place?

Should that partnership be in the form of an acquisition, a joint venture, or some other type of

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alliance? Management must determine if a partnership or alliance makes sense given the

A. Choosing (carefully) international partners

Once a firm decides to set up an international partnership, it must select a collaborator.

Picking a foreign partner with similar business practices and management styles may

B. Ending partnerships

Eventually, most partnerships end. Consequently, before multinationals jump into a

partnership, they should think through how to get out of them. Partnerships can end for

many reasons: partnering firms run into financial trouble; firms find better partners that

will bring in more business and greater revenue; or management decides to pursue new

strategic directions. Another set of reasons has to do with managers of the partnering

firms simply being unable to bridge their differences about how to run the partnership,

C. Acquisition challenges

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Acquiring a foreign firm means acquiring all its problems too, such as inferior products

and tense labor-management relations. Cultural and stylistic gaps often separate the buyer

and the foreign firm that it acquired. Recent research shows that over the long term, it is

actually better for firm performance when there is a large cultural distance between the

acquirer and the foreign firm being acquired. Management may do more homework and

act more cautiously before making acquisitions in culturally distant locations. More

preparation means fewer mistakes. Acquiring a foreign company that operates in a

significantly different cultural context entails more management learning, which can help

D. Joint venture challenges

Unlike acquisitions, joint ventures are partnerships involving shared ownership. Joint

ventures are set up as separate legal entities and represent a particular type of alliance

between two companies. Ownership in joint ventures can be split equally or one firm can

hold a dominant stake. Companies that seek a 50% share or more do so to have tighter

control over the joint venture.

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behind international joint ventures in many cases, especially for firms wanting a foothold

in tough emerging markets.

One tactic for minimizing conflict between international joint venture partners would be

to use a delegated arrangement to manage things. The partners would agree to step back

from directly managing joint venture operations and put a new management team in

place, consisting of executives hired from outside or reassigned from the partners.

Executives must think through all of the steps involved in setting up joint ventures and

E. Other Types of Alliances

International partnerships do not always involve whole or shared ownership. Table 6.9

presents four other types of alliances. For any alliance to be successful, trust between

partners is essential, along with the formation of clear goals. It also helps if management

grasps “the contradiction between synergy and identity,” as Nissan’s visionary CEO

1. Production alliances. Obtaining expertise may be part of the motivation behind

production alliances—where firms agree to manufacture products or deliver services

in shared facilities either built or owned by one of the partners. Another reason is to

lower costs.

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2. Research and development alliances. These alliances help partner firms stay on the

cutting edge of rapidly changing technology and involve joint research to develop

3. Financial alliances. Intent is to reduce the partners’ financial risks associated with

specific projects, financial alliances are typically used in capital intensive industries

where large investments are required to develop and manufacture products. Such was

the case when IBM and Toshiba formed a financial alliance to share the cost of

building expensive new computer chip manufacturing plants.

CHAPTER SUMMARY

In this chapter, we first examined the issue of managing cross-national and intra-national

diversity in international firms. Firms are sometimes reluctant to send females or other minority

members to certain countries because of local biases. Such concerns are typically overstated. The

most functional approach for managing cultural diversity issues is synergistic multiculturalism—

which involves being open to the positive aspects of all cultures and leveraging cultural

differences in ways that benefit the firm. Relatively few executives embrace this approach, with

multinationals more likely to use a parochial or ethnocentric approach to deal with cultural

diversity.

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Strategic direction and other firm-level issues are important to understand, through the lens of

cultural differences. Formal and informal mechanisms can be used by international firms to make

key decisions and diffuse information across their far-flung corporate empires. Multinationals

must realize that if the processes used to make strategic decisions are seen as fair, managers

worldwide are more likely to behave accordingly and follow through to support them. To create

fairness, managers should make significant efforts familiarize themselves with local operations

and ensure two-way communication with local employees when developing their international

strategies.

There are six stages many firms go through as develop their international operations: Stage 1 –

domestic firms begin internationalizing by exporting; Stage 2 – firms have opened overseas

offices or sales subsidiaries; Stage 3 – involves the establishment of more significant operations

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DISCUSSION QUESTIONS

1. What are some of the major approaches that companies can take to managing

diversity? Which approach has the best chance of success in your view? Explain.

• See Table 6.2 for summary of approaches

2. In discussing diversity-related conflict, we sometimes focus too much on negative

implications. Can you think of any positive effects that might result from this

concept?

• Teams that are culturally diverse should eventually make better decisions,

develop better ideas, and relate more easily to foreign clients and customers

3. What types of mechanisms can multinational companies use to make more effective

firm-level strategic decisions and to better coordinate units worldwide?

• See Table 6.5.

• Create buy-in with strategy development, use processes perceived to be “fair”

when creating international strategy to ensure more cooperation from local

subsidiary employees and help strengthen relationships.

• make significant efforts to familiarize themselves with foreign operations;

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4. What are the different stages that companies may pass through as they develop

internationally? Discuss examples of firms that have progressed through all the

stages.

• See Table 6.6 (framework of the six developmental stages)

• See II. International Partnerships: Managing Complexity and Coordination

o Stage 1 – Exporting

o Stage 2 – Sales Subsidiaries

5. Describe the different types of international partnerships and alliances that may exist

between firms. What are some of the major management and cultural headaches

associated with each type?

• Acquisition

o Challenges: cultural and stylistic gaps, acquire existing problems, more

management learning

ADDITIONAL ACTIVITIES

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MAKING THE CASE FOR INTERNATIONAL UNDERSTANDING – SAP’s Goal to

be More Diverse and “Less German” Produces Cross-Cultural Conflicts

BOXED FEATURES

GLOBAL INNOVATIONS: The Best Care in the Air: Cultural Challenges and Flight

Crew Training

ADDITIONAL RESOURCES

Table 6.1

Table 6.2

Table 6.3

Table 6.4