Associate Professor L.V. Matraeva

post-graduate A.A.Konov

Tula branch of the Russian State Trade and Economic University, Russia

Statistical approach to the analysis of corporate culture interaction process

How vital is this problem?

Present researches held by many sociologists show that both intercultural and international bonds become stronger and stronger nowadays, which leads to creating a totally new paradigm of interaction between different countries all over the globe. As an example, we might consider the fact that even 30-40 years ago almost all international contacts were minimized to formal, diplomatic level, while now, due to globalization process, the intensity of cross-national penetration has become way much stronger. Current economic and social goals, set by transnational corporations, create all new demands on the process of cross-cultural integration. This integration is now treated from the point of view of productivity and cost effectiveness of international team, and it is here that the question of cross cultural conflictness becomes the most important. It is evident that unhealthy atmosphere at the enterprise is the main reason of both negative moral consequences, low labor productivity, decrease in product cost effectiveness and increase in personnel turnover.

One should also keep in mind the fact that cross-cultural disparity is one of the most serious, though underestimated barriers for potential investors, planning to enter industries with significant turnover. In fact, incorrect corporate politics, inability to adapt corporate rules to basic regulations and standards, accepted in the invested country may lead to significant drop in effectiveness of investment project, even despite thorough analysis of its economical constituent.

On top of that, the analysis of cross-cultural differentiation allows to track evolutional dynamics of basic criteria, identifying human behavior. With enough statistic data, this research can be held both on national and international levels. This research might also be interesting if we consider the fact that these cross-cultural criteria are very hard to modify. While external features of corporate culture can rapidly change with time, basic ones are strongly resistant to evolution, which, despite changing cultural paradigm, allows researchers and investors to forecast corporate conflicts and identify which social aspects can be used as sticking points for cross-cultural interactions during future decades.

Naturally, corporate cultures of various nations have been formed during hundreds of years under influence of various contradictive (and in many times totally arbitrary) factors. The evolution of corporate cultures has walked its way from its total absence to global recognition of its importance and understanding that lots of hard work should be applied to grow corporate culture in a true supporting system that will significantly augment business productivity.

History of corporate culture researches

Modern attention to corporate cultures is natural and can be easily explained, since optimizing cross-cultural communication and interaction is the primary way to augment the efficiency of direct international investments, that have grown geometrically within last decades.

The study of national corporate cultures and ways to integrate them is held by lots of scientists. However, most of these studies analyze corporate cultures from empiric, qualitative point of view, while statistic, quantitative approach isn’t highly widespread. This situation is totally faulty, since only statistical methods of analysis allow to identify key traits of corporate culture, established in any specific social peer group, regardless of its scale. They also allow the researchers to assess the differentiation of analyzed corporate culture in comparison with other ones. These quantitative results, in their turn, allow first to identify the qualitative criteria of corporate cultures that differ most throughout cross-cultural interaction and then to elaborate measures to minimize negative consequences of cross-cultural dissimilarity.In order to study the conflictness level of global corporate cultures, we must first classify the basic differentiation criteria, identifying the dissimilarity between corporate cultures. Required criteria will help systemize, structure and classify global managerial paradigm. Such criteria can be found in social researches held by Geert Hofstede, world known scientist, specializing on corporate cultures and cross-cultural communications.

G. Hofstede has analyzed common and divergent traits of various corporate cultures of the world. This allowed him to point out key criteria, cultures form according to. These criteria are as follows:

· Power distance index (PDI)

· Individualism (IDV)

· Masculinity (MAS)

· Uncertainty avoidance index (UAI)

According to these criteria, Hofstede was able to develop personality tests that allow to identify factor’s strength proper for tested subject. Hofstede has applied his test system to over 30 000 people from more than 90 countries, which gave him formalized numeric description of corporate cultures, dominating in analyzed countries, classified according to 4 criteria that identify international diversification.

For the sake of deeper analysis, we should look in more details at these 4 criteria in order to identify specific cultural traits controlled by each of them.

Power distance index displays social acceptance of inequality. In other words, it displays the level of social disproportion that will be accepted by the population of analyzed country. Companies in countries with high levels of PDI tend to be centralized and to have vertically stretched hierarchic structure. Managerial crew is usually outsized and salary varies in large bounds, according to employee’s hierarchy. Low-qualified workers are generally at the bottom of hierarchic ladder, while the top is populated by highly ranked “white collars”.

Individualism, opposed to collectivism, reflects the extent to which a person integrates in its peer group. High level of individualism is natural for societies with weak interpersonal bonds. Everyone is supposed to be responsible for his own life and the life of his family, people are independent form the company they work for. Vice versa, in collectivist societies, starting from their birth date people are integrated in peer groups with high level of interpersonal interaction.

Masculinity and its antipode femininity display whether the role of a person in the society is strict or flexible, i.e. masculine society tends to think that “a man should behave as a man – earn money and protect his family, while a woman should raise children”. Feminine society tends to accept these basic guidelines in a more flexible way.

Uncertainty avoidance index portrays social tolerance to uncertainty, inacceptance of vague future and strive to discover Absolute Truth. If UAI is low in the society, people are ready to live without concerns about tomorrow. Contrary, if Uncertainty avoidance index is high, people fear the future and need to have exact action plan in order to take any decisions.

According to Hofstede, the combination of these characteristics is sufficient to identify any corporate culture, and can be used to analyze cross-cultural interaction. However, it should be mentioned that Hofstede has performed only qualitative analysis of assembled data, while it is evident that quantitative statistical analysis of this information allows to perform a deeper study of cross-cultural conflictness, effectiveness and adaptation.

Consequently, in order to perform detailed differential analysis of cross-cultural interaction, we should develop task-specific methodical system.

Differentional analysis of corporate cultures

In order to explore the differentiation between corporate cultures, we can use traditional methods of statistic analysis, which in this case will allow to measure the difference in values of all four principal criteria – PDI, IDV, MAS and UAI.

Basic way to do this is to calculate average values – arithmetic average, mode, median, and identify their economical sense according to the goals of the research. Analysis of average values leads to the following conclusions:

Power Distance Index with minimal value 11 and maximal - 104 shows arithmetic average of 58,6 points, which is almost equal to median value of the interval. Meanwhile, mode for PDI equals 80, which is more that 21% higher than median value. These results can be explained by historic and social background of this criterion – strict hierarchic authoritarian management system has globally dominated through centuries, alongside with high level of social inequality. The influence of these factors started to decrease only in recent times, leaving a deep trace on managerial cultures, especially in countries with emerging economics.

Maximal value for Individualism is 91, while minimal – 6 points. In this case values of arithmetic average and median are almost equal either, while modal value is as low as 20 points. It is 27% less than median value and this fact can also be explained economically. Demonstration of individual personal qualities is not common for the vast majority of corporate cultures, since they are represented by the countries from emerging markets. Workers are anticipated to join the team of their peers and perform collectively in order to achieve shared goals. This social paradigm naturally results in low modal value of IDV criterion.

Masculinity criterion has symmetrical spread, its centre is in the middle of the interval, modal, median and arithmetic average values match within 10% interval. As a result, we might conclude that the allocation of this criterion is rather centered. This means that cultures with both high and low levels of MAS are commonly widespread in the world. Social attitude towards gender roles in the society changes gradually from strict fixation to total flexibility.

Median value of Uncertainty avoidance index equals its arithmetic average, which means that the allocation of this criterion is centered as well. However, its modal value is 86 and exceeds arithmetic average by more than 19%. Practically, this incoherence reflects on international corporate culture as indecisiveness, augmented desire to avoid insecurity, desire to have social guarantees and structured routine job.

This primary analysis of corporate differentiation criteria allows to identify basic trends and characteristics common to all corporate cultures worldwide. As for cross-cultural interaction, in order to characterize and assess its conflictness, we should analyze the differentiation of each criterion separately.

Differentiation of each characterizing criterion allows to identify polar criteria, being the source of cross-cultural conflicts in most cases. This differentiation can be measured with three methods:

- decile method

- maxmin method

- calculation of Gini coefficient.

Three tools are necessary in this research in order to minimize erroneous results.

According to the results of the calculation, PDI criterion has maximal differentiation, while MAS and UAI are less differentiated. This corellates with the fact that UAI and MAS have centered spread and can be explained from social aspect: at the current level corporate society suffers more from the problems linked with hierarchical inequity than from the ones, connected with the role of individual in the society.

This research also shows that differentiation between IDV values of analyzed countries is higher compared to that of MAS and UAI. Therefore, cross-cultural systems tend to generate more conflicts due to controversial behavior of personnel in terms of manifestation of individualistic qualities, than qualities, depending on other criteria.

This statistic research allows to form basic conclusions about potential cross-cultural conflictness, since high level of criterial differentiation increases the probability that levels of cultural criteria in corporate communication will either be polar or differ significantly. This, in turn, will provoke corporate conflicts and minimize productivity and personnel efficiency.

Analyzing corporate criteria separately allows to identify key reasons of corporate conflicts, but it can never display the compound picture of corporate interaction, since corporate criteria are interdependent and should be analyzed only in synergy. Therefore for the sake of further analysis, we will apply methods of complex differentional analysis.

Graphic imprint of cross-cultural interaction.

The above analysis allows to identify general conflictiveness of corporate cultures. However, it doesn’t display corporate interaction in a complex way, since key criteria are studied separately. But corporate culture is only formed when all four criteria interact, consequently deep analysis is only possible, when multicriterial methods involving all four criteria are applied. In order to continue the research, the term “corporate culture surface” will be introduced. Corp culture surface is a surface of a polygon, with vertexes represented by the values of 4 criteria, described above. In order to simplify the calculations, we will use polar coordinate system in our research, since values of differentiation criteria are in fact r coefficients, used to calculate position of a point in polar coordinate system.

Ideally, corporate differentiation criteria should not correlate with each other and polar graph of “corporate culture surface” should represent a classic radar diagram, since in that case φ, the degree between 4 parts of diagram would equal 90 degrees. However calculations have shown that correlation between value pools of 4 criteria doesn’t equal zero. The actual correlation between criteria can be displayed graphically, PDI axis is displayed as a vertical line. Digits show the degree between the four axis. The smaller the degree, the higher the correlation.

Pic. 1 – Criterial axis in polar coordinate system

The next step is to transform values of criteria, appropriate for each country into polar coordinates. Resulting graph is graphic imprint of corporate culture, or “corporate culture surface”. During our research, this method of cultural graphic interpretation has been applied to more than sixty corporate cultures, analyzed in Hofstede’s works. For instance, graphic imprint for USA will be the following:

Pic. 2 – “Corporate culture surface” of USA

Numeric value of this surface equals 3092 units, calculated using polygon surface calculation formula.

Analysis of the above graph leads to the conclusion that American corporate culture has high values of Hofstede criteria. This, in turn, can mean that American corporate culture is highly likely to assimilate other cultures that have less articulated corporate culture, if only they don’t have strongly opposite values of one or more criteria. The above statement can be demonstrated graphically. As an example, interaction between Japan and USA is demonstrated on the following graph.

Pic. 3 – Corporate interaction of USA and Japan

It is widely known that this interaction is characterized by augmented conflictiveness. The graph shows that firstly, overlap surface of these two cultures is insignificant, compared to overall surface, and secondly, that there is a considerable divergence in UAI criterion (81 for Japan and 37 for USA), IDV criterion (46 for Japan and 98 for USA) and MAS criterion (83 for Japan and 53 for USA). Thus, three criteria out of four show significant discrepancy in this interaction. This is the key reason of corporate conflicts and overall inefficiency of USA-Japan interaction, and the above graph also allows to measure this level by dividing the surface of overlapping area by overall surface of two imprints.

The above graphic system allows to analyze any international corporate interaction and evaluate level of conflictness and criteria that are most likely to be the source of this conflictness. This technique allows to perform visual analysis of more than 4,5 thousand possible interactions, including any of 68 corporate cultures, Hofstede mentioned in his research.

Let’s study several international pairs that are likely to form along with the flow of transnational direct investments.

According to UNCTAD’s World Investment Report, main global streams of Direct International Investments are as follows:

Pic. 4 – Global streams of Direct International Investments in 20010.

The diagram shows that the countries receiving most DII are USA, Belgium, China and Great Britain. Main exporters of DII are USA and Great Britain as well, France, Germany and Canada. As an example, let’s analyze the following pairs: France-China and Germany-Russia.

Here come the graphical imprints of these interactions.

France-China

Pic. 5 – Cross-cultural interaction of France (Larger polygon) and China (Smaller polygon)

The diagram shows that this interaction has high level of conflictness, since imprint overlap area is significantly less than its total area. IDV criterion has the most significant discrepancy (71 for France and 15 for China), followed by UAI (75 for France and 25 for China). The surface of the imprint of France is 3700 units, while the surface of Chinese one – only 1196 units, which indicates that corporate differentiation criteria are more intensely developed in France increasing its ability to assimilate other corporate cultures.

Germany-Russia

Pic. 6 - Cross-cultural interaction of Russia (Larger polygon) and Germany (Smaller polygon)

The diagram shows that this interaction also has high level of conflictness, although it is smaller than the one in France-China case. The source of conflicts in this case is PDI criterion (it equals 88 for Russia and 26 for Germany). Values of other criteria differ too, however, less significantly, for instance, MAS criterion differs by 27 points only (56 for Germany and 29 for Russia).

Conclusion

Corporate culture is a unique element of any society, that is formed under the influence of various arbitrary factors throughout centuries. It usually remains concealed and tends to be treated without proper attention most of the time. However, it influences all aspects of human behavior and its key characteristics can hardly be affected in short-term period, no matter how strong the impact is. The disregard of this fact, leads to numerous cross-cultural conflicts and major inability to reach anticipated financial results, especially if this is the case of a transnational company, striving for a share in an emerging market. Cross-cultural conflicts create a large amount of stress, lead to burnouts and significant decrease in productivity, which, in its turn decreases the ROI of transnational imvestment. Thus, a significant amount of attention should be paid to cross-cultral interaction.

Due to its nature, corporate cultures are hardly measurable and comparable, although extensive researches are held in this domain. In the above article we have presented a method to analyze corporate cultures by comparing their graphic imprints.

Graphic interpretation of corporate cultures’ imprints is a simple, yet visual way to understand and analyze cross-cultural communication. Basic mathematical and statistical instruments, described in this article permit to assess overall conflictness of cross-cultural interaction and to identify social traits, being the reason of this conflictness. Advanced study of “corporate culture surfaces” and their interaction allows to perform a deeper analysis of transnational corporate interaction and to estimate numerous cross-cultural characteristics, such as cultural assimilation, cross-cultural domination, influence of a single criterion on the entire transnational interaction, dynamics of criteria throughout time and other factors, vital for building an effective transnational and cross-cultural business.