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Multinational Managers: Spotting the Difference Between Locals and Global Citizens

Published: June 07, 2011 in Knowledge@Australian School of Business
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Cross-cultural training and fluency in a new language are expected parts of the armoury of most multinational managers prior to being dispatched to work in foreign subsidiaries. Typically, they set out confident that they know what to expect and, importantly, that their behaviour will not offend. But preconceived ideas of how local staff members – host-country nationals – might behave in the "new" territory, and how the manager might behave towards them are risky.

"People think every local working in a multinational organisation is a representative of the local culture, but that's not the case," says Dan Caprar, a lecturer in Organisation and Management at the Australian School of Business. "In China, for instance, foreign managers tend to assume all of the local staff will behave in a way that matches common stereotypes about Chinese people."

In the early stages of globalisation, as corporations expanded into new regions, they made the mistake of not recognising cultural differences – incoming managers simply behaved in the same way they would in their home territory, Caprar points out. This proved problematic, and as a result the field of cross-cultural management was born, with the aim of teaching managers how to factor in cultural differences. "That's all fine and good. It's all about cultural sensitivity and we like that, we teach that," Caprar says. But he argues it's gone too far. In a research project across a range of multinational companies operating in Romania, Caprar conducted focus groups and interviews with host-country nationals and human resources professionals working in consulting, financial services and other industries.

There's a broad – but erroneous – assumption, that when hiring locally, locals will all behave in the same way, Caprar notes. However, he found that many host-country nationals, particularly those who have worked within a multinational over time, no longer fit the stereotype. Instead, they see themselves as "global citizens" – modern, cosmopolitan and sophisticated. It's a result of and a reason why they are drawn to the employer in the first place, according to Caprar. "Host-country nationals often come into the multinational company because they have been exposed to different cultures. They are attracted to an international company and they feel much more comfortable there." Through the process of socialisation within an organisational culture, they become culturally unique and different from their local counterparts, suggests Caprar. "They think, 'I am a Romanian working in Romania, but in a US corporation – so I no longer behave like a typical Romanian. Managers in international companies need to realise this."

Stages of Change

Caprar's research identifies four main profiles – or cultural types – among host-country nationals in foreign offices.

The Infatuated Employee has an extremely favourable attitude towards the employer company and a much-idealised perception of his or her working situation. These employees only talk about the advantages of working for multinational corporations and seem particularly focused on symbols of status and being distinctive from the local environment.

The Converted Employee also has a high regard for the employer and the lifestyle of the originating nation, but is more detached and less emotional. These converts are well adjusted to the culture of the organisation and still limit interaction with their own local culture.

The Conflicted Employee is frustrated and dissatisfied with the job and has a sense of being exploited by foreigners whose culture they consider to be no better than their own.

The Reconciled Employee has come to terms with the differences between the local culture and the behaviours or attitudes they encounter at work – but remains highly aware of them. These employees can see the positive features of how they are expected to behave at work, while retaining a strong connection with their own origins.

"It's important to recognise that not all employees will display the same level of adjustment to the culture of the organisation," says Caprar. "Practices that are either too standardised and based on the organisation's home culture, or too localised and based on the foreign culture, could both be counterproductive. Companies need to adjust to the cultural diversity of their local employees, who may range from highly local to highly non-local in terms of their cultural features. Companies will need to first learn what type of employees they have and then design customised practices not based on cultural stereotypes but instead based on the characteristics of their workforce."

The cultural profile of workforces should be evaluated regularly, as it will change over time, Caprar advises. Employees may become more "converted" or "reconciled", requiring different approaches in terms of how they are managed."Companies also need to be mindful of the potential psychological strain that may characterise the 'conflicted' employees," Caprar says. "Special programs encouraging cultural integration, and therefore a move towards 'reconciled' employees, may need to be developed. This avoids exaggerated socialisation into the company's way of doing things, which could estrange some employees."

International Integration

Businesses that try to duplicate their home-base management practices in foreign offices may fall short of their potential peak performance levels, according to new research. A study across 27 countries by Julie Cogin, a management professor at the Australian School of Business, has discovered that global best practice involves a mix of standardisation and localisation. Standardisation helps to create a worldwide presence and supports clients with global operations as well as providing economies of scale and scope. However, localisation makes adjustments for differences in local customer needs, national employment law, language, cultural norms and national allegiances. Best practice does not necessarily have to be rolled out across the globe from headquarters, the research shows. It may originate from a high-performing subsidiary. Realising this requires learning channels that feed back into head office for potential utilisation across the business. The pool for great ideas then, becomes an ocean, Cogin says. "Global best practices can come from a local office... It's about how an organisation learns from its subsidiaries and then is able to put in place best practice across the whole entity, irrespective of where the ideas have been sourced."

Companies need to seek out the good things going on in their subsidiaries and regional offices. "As Dan Caprar's research has found, if you've got great managers in the subsidiaries that have a global mindset and not a local mindset then they will be developing the best practices," Cogin says. "Global mindset in the local subsidiaries can be the source of global best practice – we've shown it empirically."

Caprar believes organisations should continue to train upcoming expats on local customs and behaviours before sending them on overseas postings. But they must also prepare them for the potential surprise of having to manage a local workforce highly acculturated to Western approaches. "Employees may expect to be treated as global citizens rather than locals," Caprar says. "Failure to recognise their adaptability may de-motivate or even offend them.

Assumptions could lead to wrong decisions. "Instead, use knowledge of the employees, not knowledge of the local culture, in order to come to management decisions," Caprar advises. "Find out what employees want. Most do not want to be treated as a local, they are happy with international standards and customs." The upside is that companies may not need to worry too much about the often-discussed "cultural distance" when expanding offshore because the cultural gap with their employees may not be as strong as it used to be. "Of course, the downside is that through such staff the company may lose the advantage of local cultural knowledge," Caprar notes. "The solution is to aim for 'reconciled' employees who are integrated well with local and foreign cultures."

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