My Article Review on "Cultural Values and the CEO: Alluring Companions?"

There are numbers of business organizations in the world. Each of these organizations or companies would have Chief Executive Officer (CEO). Each CEO would have different style in managing their company. According to Henry Mintzberg’s book, The Nature of Managerial Work, CEO roles can be divided into three major groupings:

1. Interpersonal Roles

Interpersonal roles arise directly from a CEO’s formal authority. Interpersonal roles include:

1. Figurehead role: representing the organization in formal ceremonies
2. Liaison role: interacting with those outside the organization who may affect its success
3. Leadership role: directing and coordinating the activities of subordinates
1. Informational Roles

Informational roles arise as CEOs deal with information. Informational roles include:

a. Monitor role: scanning the environment for information the organization may need

b. Disseminator role: sharing information with and distributing it to subordinates

c. Spokesperson role: transmitting information to others in an official capacity

3. Decision-making Roles

Decision-making roles arises as CEOs is the one who have the authority to commits the organization to action by deciding based on information which have been given to them. Decision-making roles include:

a. Entrepreneur role: initiating innovative products or ideas

b. Disturbance Handler role: responding to threats and conflicts that are usually beyond the company’s direct control

c. Resource Allocator role: deciding who will get which resources and how much they will get

d. Negotiator role: dealing with others to obtain competitive advantages for the firm

Furthermore, cultures where these organizations hold their business may be vary. These cultures have certain values which can give impact on how organizations run. According to a research done by Geert Hofstede, a Dutch social scientist, impacts of cultural values on organizations can be seen in four dimensions or value systems:

1. Power Distance (POW)

It refers to the extent to which a culture encourages unequal distributions of power among people. Distinct characteristics of organizations on each extreme point:

1. Low POW

§ There are more interactions among people of different social classes

§ People with low-status position can easily move into higher-status position

§ Status differences are minimized

§ Flatter organization pyramids

§ Fewer supervisory personnel

§ Smaller wage differentials

§ Structure in which manual and clerical work are equally valued

2. High POW

§ People with high-status keep their distance from low ones

§ Status advancement are difficult

§ Tall organization pyramids

§ More supervisory personnel

§ Large wage differentials

§ clerical work are valued more than manual work

2. Uncertainty Avoidance (UNC)

It refers to the extent to which people of a society feel threatened by unstable and ambiguous situations and tries to avoid them. Distinct characteristics of organizations on each extreme point:

1. Low UNC

§ Less structuring of activities

§ Fewer written rules

§ More generalists

§ Variability

§ Greater willingness to take risks

§ Less ritualistic behaviour

2. High UNC

§ More structuring of activities

§ More written rules

§ More specialists

§ Standardization

§ Less willingness to take risks

§ More ritualistic behaviour

3. Individualism-Collectivism (IND)

It refers to the extent to which people will prefer to work individually or prefer to work in a team. Distinct characteristics of organizations on each extreme point:

1. Low IND

§ Organization is considered as family

§ Organization defend employee interests

§ Practices are based on loyalty, sense of duty, and group participation

2. High IND

§ Organization is more impersonal (lacking of friendly feelings)

§ Employees defend their own self-interests

§ Practices encourage individual initiative

4. Masculinity-Femininity (MAS)

It refers to the extent to which a culture values assertiveness, competitiveness, and the acquisition of tangible things as opposed to passivity, cooperation, and emphasis on feelings rather than goods. Distinct characteristics of organizations on each extreme point:

1. Low MAS

§ Sex roles are minimized

§ Organizations don’t interfere with people’s private lives

§ More women in more qualified jobs

§ Soft, yielding, intuitive skills are rewarded

§ Social rewards are valued

§ Intuition as problem solving mode

2. High MAS

§ Sex roles are clearly differentiated

§ Organizations may interfere to protect their interests

§ Fewer women in qualified jobs

§ Aggression, competition, and justice are rewarded

§ Work is valued as a central life interest

§ Hard facts as problem solving mode

§ More industrial conflicts

These dimensions represent cultural values of countries in the world. It is obvious that each country will belong to a certain extreme (i.e. low / high) of these four value systems. Ellen F. Jackofsky, John W. Slocum, Jr., and Sara J. McQuaid researched on how these cultural values relate to CEO roles which have already been mentioned in the beginning of this review. This research was done in 1988 by collecting articles printed in English which were published between 1977 and 1986. They conduct research on countries by clustering them and search for articles about top companies’ CEOs in each cluster. They analyzed 5 five countries.

1. France

Bergard Hanonof Renault and Jean-Paul Parayre of Peugeot SA were chosen as discussion topics. They described how France has high POW by pointing out how both CEOs were forced out of their positions by the labor unions. Not only pointing out the CEO departures, but they also discussed about how both CEOs were though-minded and had autocratic leadership style.

2. Germany

Carl H.Hahn of Volswagen, Karlheinz Kaske of Siemens, and Heinz Nixdorf of Nixdorf Computer, A.G., were discussed. These three CEOs’ have similar behaviours that could reflect Germany value systems. First, they applied extensive rules and regulations in their companies (high UNC). Second, they determined their success by career advancement, challenging jobs, and opportunities for recognition as a leader in the field (high MAS). Third, high MAS is also showed by how they solved problem using hard facts (i.e. rely on engineering principles). Finally, medium IND is shown by how they emphasized on stable employment, educational training, and the firm’s performance standards.

3. Sweden

Pehr Gyllenhammar of Volvo and Percy Barnevik of ASEA were discussed. Both CEOs reflect individual initiative (high IND) and high risk taking (low UNC). Low MAS is displayed on how Gyllenhammar manages with a peple-oriented style. Finally, low POW is showed by how Barnevik decentralized responsibility so that accounting and profits of the company were not under the control of one central authority.

4. Taiwan

Y.C. Wang of Formosa Plastics Group was the only one discussed here since articles found were limited. Here, Taiwan’s low IND is showed in how Wang emphasize on family. In addition, Wang also devote himself to the jen philosophy which states that to describe a person, one must describe not only the personality but the intimate social and cultural environment that makes his or her existence meaningful.

5. Japan

Ichiro Isoda of Sumitomo Bank, Takashi Ishihara of Nissan, and Yoshihiro Inayama of Nippon Steel were used as primary examples. These CEOs reflect high MAS and high UNC in their behaviours. High MAS is reflected in their great interest in work and emphasis on excelling, the establishment of clear lines of authority and responsibility, decisions supported by a great deal of information, and the intrusion of the company into the personal lives of employees. High UNC can be seen in how they use groups in making strategic decisions, the discouraging of conflict and competition within companies, and through rites and rituals.

By looking at the above examples, we could see that every CEO has their own leadership style and every leadership style may also be affected by cultural values that apply in the country where the CEO is “ruling”. Cultural diversity perhaps can be related to how managing style diverge from one country to another. Thus, if a company wants to hold business activity (e.g. business negotiation) in a country with different value systems, it is important for the CEO to understand how cultural values are interpreted in that particular country in order to avoid strategic blunders or mistakes. Hence, by understanding other side’s culture, the chance of having successful business will increase.

By Antony Gumi, March 2008

Reference:

Jackofsky, Ellen F., Slocum, Jr. John W. and McQuaid, Sara J. (1988), "Cultural Values and the CEO: Alluring Companions?", The Academy of Management Executive II, 1, pp.39-49.