Leadership in a Cross-cultural Organizational Setting

Abstract

This paper discusses leadership in a cross-cultural organization setting. It begins by highlighting the importance of effective leadership in a cross-cultural organization followed by the significance of cultures and the need to appreciate different cultures. Reference has been made to various cultural dimensions as propounded by Hofstede. In addition, a review of various literature on cross-cultural leadership has been presented as well as the importance of emotional intelligence in developing effective leadership skills. The paper could not be complete without discussing the challenges facing leaders in a cross-cultural organization as well as the strategies that can be used to foster synergy between people belonging to different cultures.

Introduction

Multinational companies and their management work in an environment that is highly interlinked. For instance, in the last two decades, international inflows of investment increased by more than three times, while investment in the third world increased by more than six times. This trend continued well into the 2000s and is still evident today. As a result, numerous significant business opportunities of the new century continue to be present in other countries other than the business’ home country. In addition, the continual globalization of businesses does not imply the decline of cultural disparities. As a result, the success and competitiveness of any multinational or international business depend heavily on the quality of successful global corporate leadership (Adler, 2002). However, according to a three-year study conducted by Gregersen, Morrison, and Black (1998), 85 percent of United States Fortune 500 firms did not think they had enough multinational leaders to carry on with their international businesses. The purpose of this paper is to examine leadership in a cross-cultural organization. The paper will examine aspects such as the challenges facing the leadership in such organizations, emotional intelligence of such leadership, theories of cross-cultural leadership, and factors that influence the success of such leadership. A review of various peer-reviewed journal articles will also be done to get insight into how some cross-cultural organizations have succeeded through effective leadership in different parts of the globe such as China, Europe, and the United States.

The Significance of Culture in Business

A country’s culture has a significant influence on how organizations, as well as members of an organization, behave. Previous studies have shown that many cross-cultural disparities, for instance, Hofstede’s (1997) collectivism/individualism cultural orientation, may influence the performance of an organization. For instance, in some countries, people are socialized to act cohesively (collectivism) instead of as individuals driven mainly by self-interest (individualism). Characteristics of collectivist societies include: “identity-based on the system, weak division between private life and work, priority on relationships, tight social networks, and external pressure or shame,” (Hofstede, 1997, p. 37). Collectivist societies include Colombia, Japan, Hong Kong, and India among others while many Western countries such as the United States, Canada, Australia, and Germany are individualistic societies (Trompenaars, 1993; Hofstede, 1997).

Moreover, a country’s unique cultural characteristics have an important role to play in influencing the management and leadership style that is used in an organization. Leung (2005), in her study of Western managers working in Chinese firms, found that effective leadership in one society may be unsuccessful in another society with different cultural attributes. As a result, cross-cultural organizations can only be effective if they identify and nurture the most suitable leader behaviors for the applicable cultural situation. There are tons of examples of situations in which cultures may clash in an organization. One good example is that managers are required to arrive promptly for meetings in countries such as the United States, where time is a crucial element. On the other hand, deadlines may not be important in countries such as Italy, which are less time-focused (Trompenaars, 1993). Countries such as India exhibit a long-term orientation towards worker rewards and career development, whereas, in the United States, the focus is on short-term recognition and reinforcement (Ilangovan, Scroggins & Rozell, 2007). Given these stark cultural differences, any leader of an international organization must identify these cultural differences and integrate them in his/her leadership to be successful (Adler, 2002).

A Review of Literature on Cross-Cultural Leadership

Chien (2006) carried out a study to highlight the factors that explain the disparities between the Chinese and the western people. The study also described the understanding, knowledge, and skills required by western firms that are run in China. The researcher collected data from five subsidiaries of a western company operating in China. The researcher randomly selected about 20 workers and 10 managers from each subsidiary, who were chosen from an employee list availed by the human resources department. The total sample size chosen was 150 employees, with 68 percent of them being male and 32 percent being female and 85 percent of the employees aged between 20 and 40 years (Chien, 2006). In addition, 50 managers took part in the study. The researchers then developed a self-administered questionnaire that incorporated the entire Work Preference Inventory and an adapted version of the Asian Values Scale (AVS). The researchers from the study found that China does not have a single market. Moreover, the environment, culture, living, and even languages in China are a reflection of regional differences that exist in the country. The market varies from one province to another and even in each province. Nevertheless, although there are numerous different markets in China, all of them are governed by Chinese culture. Therefore, western management can’t be effective in China without the managers knowing the Chinese culture. To successfully carry out business with the Chinese people, interested persons need to learn what and how the Chinese people think and act (Chien, 2006).

McLaurin (2006) argues that due to the stiff competition in the international business arena, many organizations are susceptible. For organizations to be reactive, quick, and flexible in such an environment, they need to have a deep understanding of cultural disparities at both country and organizational levels. Organizations should try to build leaders who have international mindsets as best as they can. The study by McLaurin (2006) addresses one of the important success factors influencing success in the current business environment. The factor under investigation is the ability of a firm or organization to build international business leadership.

To begin with, the article highlights fundamental attributes, features, and behavior of distinctive business leaders in four different cultures namely: the American, European, Arab, and Japanese cultures. The authors then concentrate on the unique typologies and dimensions of culture by which the four cultures can be assessed and compared. The article also examines the development of leadership from different countries, providing an understanding of the use of the Diversity Collaboration model. This section also discusses the context and different circumstances and highlights the strategies used by countries to develop future leadership. The article also identifies valuable strategies and methods used in cross-cultural leadership and in managing both diversity and cooperation concurrently. By the integration theory, the Diversity-Collaboration model becomes a Diversity-Collaboration-Integration (DCI) model when there is a need for both high diversity and high integration (McLaurin, 2006).

The author argues that several factors are required when choosing and creating future leaders for the new information business environment. These factors include the need for the leaders to be culturally diverse and integrated; and the need for the leaders to have a better insight into cultural diversity so that when cultural diversity is present in an organization, future leaders will be in a better position to make use of suitable organizational mechanisms to integrate efforts. Based on comparative analysis and interpretation, the article concludes that there is a need to allow room for cultural diversity in the strategies used for leadership development. In addition, there is a need for an integrative mechanism (McLaurin, 2006).

Ogbor (2000) studied the relationship between the practices of Western leadership and authority and those of a non-Western culture in their managerial and organizational contexts. In particular, it studies “the mechanism for organizational commitment through the use of a non-Western authority relationship in a Western organization situated in a non-Western culture” (Ogbor, 2000, p. 49). This study is motivated by the discussion of non-reliable information presented in the data concerning changes in the organization with non-Western ideas that were provided in both, divergence and convergence theories. Motivated by this weakness, the study by Ogbor (2000) proposed “an alternative framework that would conceptualize the process of interaction and the product of organizational development in situations of cross-cultural transfer and application of management practices.”

The analysis conducted in the study points to a different method of conceptualizing organizational change in a cultural context in which each polarity needs the other for its realization, and their fusion creates something that goes beyond the convergence and divergence theory. The fusion of Western and non-Western cultures of organizational behavior and authority relationships creates a realization that in certain contexts of cross-cultural transfer of organizational practices a conflict of existing and new arrangements might not arise (Ogbor, 2000). This is because a certain aspect of foreign organizational practice might correspond with native norms. It is also possible that the foreign aspect or normative behavior might prove to be optimistically influential, practical, or reinforcing about a particular native pattern of behavior. From the study, the author concluded that the convergence and divergence supposition prevents or fails to create space for contingencies that could alleviate potential conflicts resulting from different cultural norms. Creative adjustment to change (rather than cross-vergence) creates a general phenomenon that may be referred to as creative synthesis. In other words, it leads to actions that are effective in using new or to serve recognized ends and values (Ogbor, 2000).

Theories of Cross-Cultural Leadership

Various theories have been developed to explain leadership in cross-cultural organizations. However, this paper examines only the theory of leader-member exchange (LMX) and the servant leadership theory.

Theory of leader-member exchange (LMX)

Graen (2003) argued that “leadership is a complex concept that includes at least a team leader, a team member, and an exchange relationship between – a leader, a member, and an exchange (i.e. leader-member exchange or LMX)” (p. 67). If any of these elements is lacking, leadership cannot be said to exist. The LMX theory of leadership proposes that the effectiveness of a leader is determined by the quality of the relationship between a leader and individual workers. A leader is a leader only if he has at least one follower and a trusting, respectful, and committed mutual relationship with the follower. However, due to time and energy constraints, leaders develop close relationships with only a few employees with whom they share their personal and positional resources so that the employees can be productive. The relationships developed between leaders and employees, therefore, vary in quality and range from in-group to out-group relationships. In-group relationships are of high quality and are characterized by high levels of information, communication, mutual support, informal influence, trust, and negotiating latitude. Conversely, out-group relationships are of low quality and are characterized by mistrust, formal supervision, little support, and attention.

Leader-member relationships and their effect on organizational performance have been studied by many researchers in different parts of the globe. These researchers have found that such relationships make significant contributions to organizations by aiding such processes as making of decisions, team spirit, and organizational citizenship tendencies (Gersick, Bartunek & Dutton, 2000; Gerstner & Day, 1997). Healthy leader-member exchanges are constructive because they nurture relationships that enable employees to be committed and inspired to make positive contributions to their organizations. The performance of employees is directly and positively related to the quantity and quality of their relationships with their managers (Chen et al., 2005). Substantial research also shows that high-quality leader-member relationships motivate the workers to be more productive and to even carry out tasks that are not part of their prescribed roles.

The positive effect of quality leader-member relationships has not only been found in the Western countries but also in the Eastern countries, the majority of which are collectivist societies, such as Hong Kong and Japan. For instance, Wakabayashi, Graen, and Graen (1988) found that “newly hired Japanese employees who had developed high-quality leader-member relationships with their immediate supervisors were positioned as in-group members that made them central to the management system,” (p.224). On the other hand, new employees who had not developed high-quality leader-member relationships were considered out-group members and were not part of the management central system. Thus, the quality of the vertical dyad relationship had a major effect on inspiring newcomers to work, mentoring their behavior toward the achievement of their career objectives, and obtaining promotions and bonuses.

The servant leadership theory

The theory of servant leadership was first propounded by Robert Greenleaf in 1977. According to him, servant leaders have the passion to serve first instead of leading first. Servant leaders strive to fulfill the needs of those they lead so that they can utilize their full potential and become what they desire to be. Instead of putting their own needs and interests first, servant leaders put the needs and interests of their followers before their own. While this trait may be confused with low self-esteem, proponents of the servant leadership theory argue that on the contrary, servant leaders have strong self-worth and moral conviction. Whereas the majority of the traditional leadership theories are based on the behaviors of the leaders, the servant leadership theory is based on the principles, values, and beliefs of a leader. A servant leader is said to possess certain distinctive characteristics, including “vision, honesty, integrity, trust, service, modeling, pioneering, appreciation of others, empowerment, communication, credibility, competence, stewardship, visibility, influence, listening, encouragement and delegation,” (Hannay, 2009, p. 4).

Application of servant leadership to cross-cultural organizations

Hannay (2009) argues that as countries become more closely linked with the global economy, it is inevitable to talk about leadership and management theories without referring to the effect of cross-cultural contingencies. This is because a leadership style that works effectively in one country may be disastrous in another country. In addition, as the workforce becomes more and more culturally diverse, it poses special challenges to the management of organizations. Making use of Hofstede’s cultural dimensions, it is imperative to know whether a servant leadership model would be applicable in an organization with workers belonging to different cultural backgrounds.

The first cultural dimension is power distance, which has been defined as “the degree to which members of a society accept and acknowledge the hierarchical differences in that society,” (O’Keefe and O’Keefe, 2004, p.619). In countries with low power distance, the level of inequality is also low. Equally, the gap between the rich and the poor is narrow. From an organizational perspective, low power distance is evident when both the senior and junior workers work collaboratively to address any issue that arises in the organization. The contribution of all employees is valued and each member is made to feel part and parcel and an important member of the organization. On the other hand, in countries with a high power distance, there is a big and growing gap between the rich and the poor. In organizations, the high power distance is manifested in the decision-making process whereby all decisions are exclusively made by the top managers with little or no contribution by the subordinate staff. However, a servant leader would value the input and contributions made by his junior employees. In such an organization, each member is seen to have something of great value to the organization regardless of his or her position or rank. As a result, a servant leader would create an environment that permits the free flow of ideas and opinions and would empower the employees to take charge and responsibility for their actions in the organization (Hannay, 2009).

The second cultural dimension, according to Hofstede is uncertainty avoidance, which measures the extent to which people are prepared to take and deal with risks. In countries with strong uncertainty avoidance, people usually think about a wide range of solutions when faced with difficulty. In addition, consultations and discussions are held by many people to address the problem at hand. Trustworthy relationships are important in such countries, with the main aim of the relationships being to evade unanticipated disappointments that can come about when dealing with strangers. On the other hand, in a society with low uncertainty avoidance, people embrace change and are not afraid to take risks. A servant leader is aware that some people like risks while others avoid them at all costs. In a working environment, risks take different forms such as change of positions, and the requirement to take on new roles and assignments. A servant leader would therefore engage his employees in training programs and guidance to prepare them for risky situations and scenarios. When employees are given new roles and responsibilities, the servant leader would ensure that the employees are first trained and equipped with knowledge and skills to undertake the new assignments (Hannay, 2009).

Masculinity versus femininity is another cultural dimension. Masculinity implies concentrating on material things, such as money and success whereas femininity focuses on the wellbeing of individuals. Countries that are considered to be feministic societies have rigorous protection mechanisms for the workers, such as fighting for the improvement of the working conditions of workers and minimum wage laws. Flexible work schedules are implemented to enable workers to bond with their families and loved ones. Businesses and organizations that operate in such societies find it difficult to lay off workers or mistreat them. This is maternalistic in nature because the emphasis is on the welfare of the people (O’Keefe and O’Keefe, 2004, p.620). On the other hand, countries that are masculine focus more on the output of the workers. Workers who fail to perform as per the standards are easily laid off to protect the bottom line of the organization. Thus, in such societies, the focus is on making profits rather than on the welfare of the employees. A servant leader has the characteristics of feminine society. Such a leader focuses on creating bonds and lasting relationships with the employees. He builds trust and loyalty among all members of the organization and strives to fulfill the needs and desires of the employees so that they can become self-actualized (Hannay, 2009).

Leadership and Emotional Intelligence

Emotional intelligence has been defined as “the ability both to know one’s own emotions and to read others’ emotions as well,” (Gersick, et al., 2000). Various studies have examined the relationship between emotional intelligence and leadership ability. For instance, Goleman (1998) studied and evaluated 188 firms (mainly large and international companies), to identify the personal capabilities among leaders which seemed to influence exceptional performance within the companies, and to what extent they did so. He categorized personal capabilities into three groups: technical skills, such as accounting and engineering; cognitive skills such as analytical reasoning; and emotional intelligence (EI) competencies, such as the ability to work with others and effectiveness in leading change. Goleman found that emotional intelligence was twice as important as technical skills and cognitive abilities for leadership positions at all levels of a firm. Goleman (1998) argued that an effective leader should portray five elements of emotional intelligence, namely: “self-awareness, self-regulation, motivation, empathy, and social skill” (p.87).

Self-awareness refers to having a deeper insight into one’s emotions, strengths, weaknesses, needs, and drives, as well as the effect of all these on those around you. Attributes of a self-aware individual are self-confidence, realistic self-assessment, and a self-deprecating sense of humor. Self-regulation refers to the ability to be in charge of or readdress upsetting emotions and feelings and the tendency to defer judgment to think before acting. Attributes of self-regulation include trustworthiness, integrity, comfort with ambiguity, and being open to change. Motivation is defined as “a passion to work for reasons that go beyond money or status, with a propensity to pursue goals with energy and persistence” (Goleman, 1998, p. 89). Attributes of a motivated leader include a strong desire to achieve, optimism even in the face of failure – and commitment to one’s organization.

Empathy is defined as the ability to understand the emotional structure of other people and treat people by their emotional makeup. Attributes of empathy include service to clients and customers, sensitivity to differences in cultures, and competence in developing and retaining talent. Lastly, social skill is defined as competence in managing relationships, creating networks, and building rapport with people from different walks of life. The attributes of social skills include effectiveness in leading change, articulacy, and the ability to build and lead groups of people.

Emotional Intelligence in the Cross-Cultural Context

Emotional intelligence is highly applicable in cross-cultural organizations because people are socialized differently depending on the cultures from which they come. Thus, effective leaders should know how to handle different people from different backgrounds. Past studies have highlighted the significance of taking into account emotional intelligence when choosing expatriate managers (Jassawalla, Truglia & Garvey, 2004). Shipper, Kincaid, Rotondo, and Hoffman (2003) studied several managers from the United States, the United Kingdom, and Malaysia and found that manager effectiveness is positively related to the self-awareness component of emotional intelligence. Following these and other studies, Zadel (2008) argued that an experienced manager who is knowledgeable about a country’s culture may include one or more of the emotional intelligence components in his leadership style to successively match the needs of a given culture with the needs of the organization, thereby leading the organization towards the achievement of the desired goals.

Although it is important to examine cultural differences between countries, it is equally important to know the cultural similarities. It is also important to examine whether different cultures view effective leadership in the same manner. A previous study by House, Hanges, Javidan, Dorfman, and Gupta (2004) discovered that most of the cultures under investigation viewed charismatic/transformational leadership as an important contribution to effective leadership. Despite holding a similar view on the preferred leadership style, how the leadership attributes are practiced may differ from one culture to another. One way of examining the similarities between or among cultures is to make use of cultural clusters. A cultural cluster has been defined as “a group of countries that share many similarities; the countries in a cluster are more like each other than another country from outside the cluster” (House et al., 2004, p. 22). It is less risky and more profitable for international companies to expand into countries that share similar cultures than those with diverse cultures. For instance, “a study by the consulting firm KPMG found that the returns from cross-border mergers between U.S. and U.K. firms (both in the Anglo cultural cluster) were 45% more successful than the average rate of return of all cross-border deals” (Gupta, Hanges & Dorfman, 2002, p.13).

Challenges facing Cross-Cultural Leadership

Cross-cultural leadership offers exceptional challenges for managers because the members of their organization have been socialized in a certain way and this socialization influences their attitudes and behaviors. In the international arena, managers and workers usually have the added intricacy of their different cultural backgrounds. Managers and employees from different cultural backgrounds have a substantial amount of conflict to deal with as they learn and react to each other’s beliefs, values, norms, and interests. In the United States, which is individualistic, people attribute success to their expertise and effort. On the other hand, in China, which is a collectivist society, people are required to give credit not only to themselves but also to the community around them as well as to the entire society for their success. As a result, Chinese managers may view personal satisfaction as selfishness or an improper lack of humility.

Based on these cultural differences, researchers and experts in the field have argued that the most common cross-cultural leadership challenge is to put in place a mechanism or a system that would enable employees and managers from different cultural backgrounds to work together harmoniously. Enabling culturally diverse individuals to work together collaboratively needs extraordinary skills and talents (Yifeng & Tjosvold, 2008). Nevertheless, the majority of the past studies have focused on cultural disparities that may disrupt relationships that involve people from different cultural backgrounds. Despite these studies highlighting and confirming the existence of numerous cross-cultural leadership challenges, few of them offer suggestions on how to address them. This focus on cross-cultural differences without providing solutions provides little guidance on how effective relationships can be developed. There is therefore a need to develop a framework through which effective leadership can be developed for foreign managers working with local employees (Yifeng & Tjosvold, 2008).

Conclusion

This paper has discussed leadership in a cross-cultural organization setting. It began by highlighting the importance of effective leadership in a cross-cultural organization followed by the significance of cultures and the need to appreciate different cultures. Reference has been made to various cultural dimensions as propounded by Hofstede. In addition, a review of various literature on cross-cultural leadership has been presented as well as the importance of emotional intelligence in developing effective leadership skills. The paper could not be complete without discussing the challenges facing leaders in a cross-cultural organization as well as the strategies that can be used to foster synergy between people belonging to different cultures.

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