The impact of company culture on IBP part V: Geography 2

As globalization is pushing companies to plan and operate more and more across the borders of their country of origin. This will have an impact on IBP processes as well. In my previous blog; https://supplychaintrends.wordpress.com/2011/04/04/the-impact-of-company-culture-on-ibp-part-iv-geography-1/ , I explored three examples on the impact of cultural preferences on cross cultural Integrated Business Planning (IBP). I used as reference the pioneering work on geographical cultural environments ‘Cultures Consequences’, in which Geert Hofstede identifies four main geographical cultural drivers for work related values in over 40 countries. They are:

  1. Power distance: Social inequality. The extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally.
  2. Uncertainty avoidance: deals with a society’s tolerance for uncertainty and ambiguity. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations.
  3. Individualism versus collectivism: is the degree to which individuals are integrated into groups. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself. On the collectivist side, we find societies in which people from birth onwards are integrated into strong, cohesive in-groups, in which people look out for one another and organizations protect their members’ interest.
  4. Masculinity versus femininity: Masculinity reflects a preference for achievement, heroism, assertiveness, work centrally and material success. Femininity reflects the values for relationships, cooperation, group decision making and quality of life. Both men and woman subscribe to the dominant value in masculine or feminine cultures.

As consultant, working across a dozen of countries and cultures in Europe, I was given Hofstede’s book by the project partner at Accenture. This is an example of typical Dutch low power distance and knowledge sharing. The book thought me a lot on cultures I worked with and more important; how my culture is perceived. It helped me many times so see the relativity of perceived issues in an intercultural situation. Unfortunately this sometimes only happened in retrospect.

We can map the four cultural drivers and the ‘programmed’ behaviours they represent with preferred IBP behaviours. For every geographical cultural driver there are many related behaviours in the work organisation. I will table some of these behaviours, which were also pointed out by Humphries and Gibbs book Collaborative Change2 and which have an influence on effective IBP in western countries. In this way we can explore which cultural drivers might favour effective IBP and assess which geographies support these cultural drivers and therefore have a natural environment in work related values that favours IBP.

1. Cultural driver power distance and some of its related characteristics:

Low power distance suggests High power distance suggests
Decentralised decision making Centralized decision making. Concentration on authority
Small proportion of supervisory personnel Large proportion of supervisory personnel
The ideal boss is a resourceful democrat; sees self as practical, orderly and relying in support The ideal boss is a well-meaning autocrat or good father; sees self as benevolent decision maker

Empowered decision making in the IBP process is vital. In the IBP cycle, executives should only see high level issues or decisions which go above a certain dollar value, or where the IBP team needs strategic guidance or a decision to continue their job. Decentralized responsibilities are often more effective in general. As Richard Branson recently said in one of his blogs3; ‘A person’s own conscience is the hardest taskmaster of all, so the more responsibility you give people, the better they will perform.’

Therefore for IBP, I would choose the first preferred dominant cultural driver to be low power distance.

2. Cultural driver uncertainty avoidance and some of its related characteristics:

Low uncertainty avoidance suggests High uncertainty avoidance suggests
Innovators feel dependent on rules Innovators feel constraint by rules
Scepticism towards technological solutions Strong appeal of technological solutions
Top managers are involved in strategy Top managers are involved in operations

IBP is about measuring ourselves against a strategy and take actions and assign resources to achieve an integrated business strategy. It needs strategic guidance for decision making and therefore top managers that are involved in strategy.  Technology is definitely an essential part to enable effectiveIBP. I don’t see it as a main driver to overcome roadblocks in implementing IBP. What supports me in my believe is that in my 2010 S&OP survey, participants scored Technical Capability as lowest roadblock to implement S&OP out a set of seven roadblocks. Senior leadership support was seen as the biggest roadblock.

Therefore for IBP, I would choose the second preferred dominant cultural driver to be low uncertainty avoidance.

3. Cultural driver individualism versus collectivism and some of its related characteristics:

Low individualistic suggests High individualistic suggests
Hiring and promotion decisions take the employee’s group into account Hiring and promotion decisions should be based on skills and rules only
Poor performance is rational for other tasks Poor performance is reasons for dismissal
Employer – employee relationships is basically moral, like a family link Employer – employee relationships is a business deal in a labour market

Decision making in IBP will be most effective when it is fact based, regardless of roles, personalities and group dynamics. Individualistic cultures, like American and English culture, will be less influenced by group thinking. Although highly consensus driven, Eastern cultures will be more likely influenced by group thinking. If facts are ignored because of group relations, we loose decision quality in the IBP meeting.

Therefore for IBP, I would choose the third preferred dominant cultural driver to be high individualistic

4.  Cultural driver masculinity and some of its related characteristics:

Low masculinity suggests High masculinity suggests
Meaning of work for workers is relations and working conditions Meaning of work for workers is security, pay and interesting work
Managers are employees like others Managers are culture heroes
Managers are expected to use intuition, deal with dealings and seek consensus Managers are expected to be decisive, assertive, aggressive, competitive and just

Research from Cooke and Lafferty shows that there are four main constructive behaviours, which seem to support effective management across geographical boundaries. In what they call Life Styles Inventory (LSI) they define these constructive behaviours as; achievement, self-actualising, humanistic encouraging and affiliation.5 This is supported by their database with information from over 1 million managers and 12,000 organisation worldwide.

Over the past 20 years IBP has progressed well in relative masculine countries like America and the UK. These happen to be countries where most IBP literature is developed and these countries also have a very achieving culture. Cooke and Lafferty seem to have evidence that achievement needs to be supported by other styles, which are more focused on the person behind the achievement. These styles seem to be mostly supported by countries which are dominant in relative low masculine cultures. Furthermore IBP is about achieving an integrated product, demand, supply and financial strategy. And one of the core principles of IBP is to achieve this by consensus. Consensus that is not created through aggression or intimidation, but taking in mind the facts and person behind the discussions and decisions that lead to the consensus.

Therefore for IBP, I would choose the fourth preferred dominant cultural driver to be low masculinity.

Having just defined the four preferred cultural drivers for IBP, the author of this blog realizes that the decisions on preferred dominant cultural behaviour for IBP are very arbitrary and influenced by his own cultural preference. Furthermore, as Trompenaars points out, it is important to understand that cultures can ‘dance’ between the two sides of the spectrum and don’t always have to show one type of behaviour. It is even more effective to have one dominant side, but understand the other side of the spectrum. Something Trompenaars calls reconciliation. We can further say that something complex as geographical and cultural impact on IBP can’t be captured in four dimensions. Still I hope that making the link with Hofstede’s framework and IBP can help the thought process on future cross cultural IBP implementations and create a sense of cultural IBP intelligence.

In a next blog, I will use the preferred cultural drivers and create a scorecard to define which geographical areas have preferred dominant cultural drivers in work related behaviours to implement and sustain IBP.

  1. G. Hofstede, Culture’s Consequences, Sage Publications, 2001
  2. A. Humphries and R. Gibbs, Collaborative change, Gibbs and Humpries, 2010
  3. Richard Branson on http://www.entrepreneur.com/article/217944, January 2011
  4. Fons Trompenaars ‘Riding the Waves of cultures, McGraw-Hill, 1997
  5. Robert A. Cooke and J. Clayton Lafferty, Life Styles Inventory, Human Synergistics Inc.

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