CULTURAL DIFFERENCES FOR MANAGEMENT ADVANTAGE

CULTURAL DIFFERENCES FOR
MANAGEMENT ADVANTAGE
Professor Julian Birkinshaw
London Business School

A shift in perspective

Copyright Julian Birkinshaw 2011

From West to East:
Largest Sovereign Wealth Foreign funds
2010

Abu Dhabi Investment Authority $627
Government Pension Fund of Norway $443 b
Saudi Arabia foreign holdings b
$415
SAFE investment company (China) b
$347
China investment company b
$289
Government of Singapore investment company $248 b
Hong Kong authority investment portfolio b
$228
Kuwait investment authority b
$203
National social security fund (China) b
$147
Russian national welfare fund b
$143
b


From West to East:
Countries with the most billionaires

USA 422
China 66
Russia 65
Germany 57
India 52
UK 30
Turkey 28
Hong Kong 25
Canada 24
Japan 22


From West to East:
Countries with the most university
students
USA 14.2
m
India 6.0m
Japan 3.9m
China 3.4m
Russia 2.6
France m
2.0m
Philippines 2.0
Italy m
1.9m
Indonesia 1.9m
Brazil 1.9m


From West to East:
Homes of Fortune 500 global
companies
2001 2010
USA+Canada 201 150

European Union 156 170

Japan 104 71

Korea/Taiwan 12 21
China 12 46

India, Russia, Brazil 21

Other emerging 3


How does this global power shift
play out in the corporate world?

What will be the role of
management in generating
competitive advantage for
companies in the west and the
east?

How America led the corporate
world
(post WWII)

Advanced manufacturing
Finance and Investment
Leading-edge technology
Professional managers
Management thinking


Advanced manufacturing
Finance and Investment
Leading-edge technology
Professional managers
Management thinking


Hegemony
“A state of affairs where the
dominant class impose their
world view as if it were natural,
inevitable, and beneficial to
every social class”


HBR Blog Network
Nicholas Bloom, Rebecca Homkes, Raffaella Sadun, and John Van Reenen

Why American Management Rules the World
3:30 PM Monday June 13, 2011

After a decade of painstaking research, we have concluded that American firms are on average the best
managed in the world. This is not what we — a group of European researchers — expected to find. But
while Americans are bad at football (or soccer, as it's known as locally), they are the Brazilians of
Management.

US
Germany
Japan
Canada
UK
Brazil
India
China
Greece


CEIBS – China’s top business
school
Management faculty and their PhD school
Doucet Wharton Chen Auckland
Fernandez IESE Chen Purdue
Kim N. Carolina Liang Indiana
Lee U. Mass Meyer LBS
Wierdsma Tilburg Xu Toronto
Xiao INSEAD Yip Harvard
Xin California Irvine Zhang Harvard
Yang S. California Zhang UBC (Canada)
Yeung Michigan Zhu Shanghai


Is the American model of
management really better?

For an Asian company trying to
succeed on a global scale, is the
best approach simply to imitate the
American model?

Some historical context is

What problem was management
invented to solve?
• How to routinise
and standardise
work?
• How to maximise
employee
discipline and
diligence?
• How to organise
complex work
processes?

The architects of the American
model


The traditional American model
Coordinating Activities
Bureaucracy
Making Decisions
Hierarchy
Motivating People
Extrinsic rewards
Defining Objectives
Alignment


Weaknesses in the Model
• It is ill-suited to deliver on the key strategic
imperatives facing companies today

PURPOSE INNOVATION

ENGAGEMENT AGILITY


• It leads to alienation, discontent, and
cynicism among front-line employees


How engaged are your
employees?
80

60

40

20

0

Highly Engaged Moderately Engaged Disengaged


Who are you happiest with?

Friends 3.3
Parents/relatives 3.0
Spouse 2.8
My children 2.7
Co-workers 2.6
Clients/customers 2.4
Alone 2.2
Boss 2.0
(Rating is on a 1-5 scale)


• It leads to alienation, discontent, and
cynicism among front-line employees
• It is increasingly losing its legitimacy as a
“force for good” in society


Recent management melt-
downs


How do you rate the honesty of the
following professions?

Medical doctors 65%
Police officers 63%
Clergy 50%
Journalists 23%
Bankers 19%
Lawyers 13%
Business executives
12%
Car salespeople
6%


Alternatives to the American Model
of Management: Sources of
inspiration


Contrasting Models of
Management
Coordinating Activities
Bureaucracy Emergence
Making Decisions
Hierarchy Collective Wisdom
Motivating People
Extrinsic Intrinsic
Defining Objectives
Alignment Obliquity


Emergence

Shared Space: An intriguing analogy


Emergence
Principles for managing “common” resources:
• Clearly defined boundaries
• Rules adapted to local conditions
• Collective-choice arrangements allow all
to take part in decision-making
• Effective monitoring
• Graduated sanctions
• Mechanisms of conflict resolution are
cheap and easy to access
• Self-determination of community is
recognized by higher-level

Source: Elinor Ostrom, Nobel Laureate


Collective Wisdom


Intrinsic Motivation

Flow: “being completely
involved in an activity for its
own sake. The ego falls away.
Time flies. Every action,
movement, and thought
follows inevitably from the
previous one, like playing jazz.
Your whole being is involved,
and you're using your skills to
Mihaly Csikszentmihalyi
the utmost.”

Making work more intrinsically
interesting at HCL Technologies

• Value is created by
client-facing
employees
• Managers and support
functions serve them

– Open 360º feedback
– Smart Service Desk
– You & I

Obliquity
Goals are best achieved indirectly
If you want to get to point A, aim at point B

Don't aim at success — the more you aim at it and make it a
target, the more you are going to miss it. For success, like
happiness, cannot be pursued; it must ensue, and it only does so
as the unintended side effect of one's personal dedication to a
cause greater than oneself.

Viktor Frankl, Holocaust Survivor and Philosopher


Two perspectives on goal
setting

“We must continuously
achieve superior financial
and operating results
while simultaneously “To create a better
adhering to high ethical everyday life for
standards.” the many people.”


Cargills’ oblique goals

“serving the rural community, our customer and all
other stakeholders through our core business, food
with love, on the principles of enhancing youth skills,
bridging regional disparity, and reducing cost of living
by enhancing local and global markets.”

How prevalent and how
promising is this alternative
model?
1. Social and technological trends
make change more likely


model?
2. Cultural factors make the
alternative model more attractive in
Asia


Dimensions of Culture

Individualism India Collectivism
USA

Short-term orientation Long-term orientation
China
Sweden

High power-distance Low power-distance


model?
2. Cultural factors make the
alternative model more attractive in
Asia
3. We see a coherent “India Way”
starting to emerge

Inspiration from the Bhagavad
Gita
• Greed is Bad. You should never engaged in
action only for the desire of rewards.
• Be Fair. Enlightened leaders are
compassionate and selfless.
• Act rather than React. Leaders accomplish
excellence by taking action.
• Seek Higher Consciousness. Show sensitivity
to multiple stakeholders.

Source: Pete Engardio, Karma Capitalism, Business Week, October 2006


The “India Way”

• Holistic engagement
with employees
• Improvisation and
adaptability
• Broad mission and
purpose


What about a “China Way”?
• Rapid and effective imitation of Western
business practices
• Increasing self-confidence and influence
• Opportunities for leading Chinese
companies to play their own game, to build
on thousands of years of cultural heritage
(e.g. Confucianism)


Key themes
• Your Management
Model is a
conscious set of
choices
• Build on what
works, and have
the courage to
choose your own
path Copyright Julian Birkinshaw 2011

CULTURAL DIFFERENCES FOR MANAGEMENT ADVANTAGE

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