Advice American expat executives managing overseas subsidiaries would do well to heed.

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“When in Rome, do as the Romans do,” is advice American executives managing overseas subsidiaries would do well to heed.

Easily lost in all of the logistical work and strategizing that precede a foreign assignment is the fact that American expatriates often rely on a managerial mindset that, while tried and tested at home, will not work abroad. To maximize their chances for success, they are being encouraged to rethink the theory and practice they studied in “Management 101.” Why? Very simply, what makes a business organization run effectively here will not necessarily do likewise in Brazil, Sweden or the Philippines.

Every facet of organizational behavior, at least in a functional organization, must de facto, be informed by and fundamentally consistent with, the basic values of the individuals comprising that group. Organizations anywhere can effectively undergo externally imposed changes, of course, but not to the extent that the values implicit in those changes run counter to the members’ basic beliefs. Even in today’s ever-shrinking global village, American workers adhere to basic values that, to one degree or another, remain different from those of Brazilians, Swedes or Filipinos. What makes for effective management at XYZ Company and its Minneapolis employees will likely have little bearing for the executive on his way to head up the company’s new subsidiary in Manila.

Dutch psychologist Geert Hofstede’s landmark study on the subjecti — which is cited by experts today as frequently as it was upon its publication more than a decade ago — is an invaluable starting point for expatriates open to rethinking their management of foreign operations.

After surveying more than 100,000 employees of a multinational firm with operations in 40 countries, Hofstede classified the differences in work-related values among those countries according to four main “dimensions”:

  • Power distance, or the extent to which individuals at lower levels accept their lack of autonomy and authority;
  • Individualism, or the relative importance of self and immediate family versus the collective workplace;
  • Masculinity, or the extent to which traditionally “male” goals of wealth and recognition are acknowledged, and;
  • Uncertainty avoidance, or the extent to which risk and ambiguity are acceptable business conditions.

Although some ethno-geographic patterns emerged as Hofstede located the countries along these four corresponding scales, each nation nonetheless wound up with its own unique set of work-related values.

How can the Manila-bound executive translate Hofstede’s research into practice? Let’s look at a single function of the business organization — reward and recognition of employees — as an example, and see how it might differ in the Philippines versus the United States.

As taught in “Management 101,” reward systems are what companies principally use to motivate their employees to perform. Broadly speaking, such systems have two components: compensation(i.e., monetary and in-kind payments or benefits) and non-compensation (less tangible or material rewards, such as a supportive work environment). Traditionally, reward systems in US companies have been based on the motivational theories of several prominent Western psychologistsii, which again, are required study in most business management courses. These systems usually include the following reward elements for superior performance: higher salary/bonus; public recognition; greater responsibility and broader span of control within the organization; greater autonomy and authority, and; opportunity for further advancement.

So far, so good in that these elements are essentially congruent with the US work-related values identified by Hofstede. American employees, according to the researcher’s respective cultural dimension scales, typically value job independence and equity in salary between higher- and lower-level workers (moderate-to-low power distance). They expect pay and in-kind benefits for personal initiative and performance (extremely high individualism, moderate-to-high masculinity), and are generally willing to take reasonable risks for like returns (low uncertainty avoidance). In short, a reward system characterized by internal pay equity, individual earning potential, competition and professional challenge, and public recognition for a job well done should be effective in motivating employees at XYZ’s Minneapolis headquarters.

Implementing the same reward system in Manila, however, likely won’t yield the same results. In contrast to the typical American employee, Filipino workers readily accept an autocratic work environment, constantly look to their supervisors for direction (extremely high power distance), and value group membership and acceptance more than individual recognition (low individualism).

Differences along the masculinity and uncertainty avoidance scales between the two countries are not so great, however, indicating that compensation-based rewards can still be effective motivators, and that long-term job security is not a critical factor. At XYZ’s Manila subsidiary, then, the compensation side of the reward system should include a highly stratified salary structure and emphasize group performance incentives in addition to adequate base pay levels. More important, individual awards and recognition may be counterproductive to the extent they alienate single members from the group, and promotions may actually serve as demotivators if they confer greater responsibility and autonomy without offsetting top-down support.

What is advocated here for soon-to-be American expatriates is rethinking of the management fundamentals they learned back in business school, not rejection out of hand. Much of what works for American managers stateside can, like other professional services, successfully be exported. When packing up the moving boxes, however, it might be wise for expats to save some space for the old management textbook and Hofstede’s study — as well as some time to read them.

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