Critical literature review of cross-cultural management in international companies operating in Russia

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Cross cultural management in international companies in Russia

Understanding cross-cultural management

As the forces of globalization spread out and lead to the creation of culturally diverse workforces, the business community is confronted with the need to develop and implement strategies of cross cultural management. Cross cultural management is generically understood as an administrative act which seeks to efficiently lead the culturally different staff members. However, to gain a more comprehensive understanding of the concept, the following definitions were retrieved from the specialized literature:

Cross-cultural management is "an inclusive approach to leadership that seeks to build bridges across cultures" (Shonhiwa, 2008).

Cross-cultural management is "a form of management which, recognizing the existence of local cultures, attempts to integrate the values upon which these cultures rest in different organizational functions and, at the same time, tries its best to coordinate these functions in the heart of the policy company" (Dupreiz and Simon, quoted by Nigel Holden, 2002).

"Cross-cultural management is not international management per se. […] Cross-cultural management:

Allows researchers and practitioners to know where they and others are coming from Allows researchers to identify under researched areas [and]

Throws new light on emerging areas like knowledge management and systems theory, and their role in shaping the culture of people" (Bhattacharyya)

"Cross-cultural management explains the behavior of people in organizations around the world and shows people how to work in organizations with employees and client populations from many different cultures. Cross-cultural management describes organizational behavior within countries and cultures; compares organizational behavior across countries and cultures; and, perhaps most important, seeks to understand and improve the interaction of co-workers, managers, executives, clients, suppliers, and alliance partners from countries and cultures around the world" (Nancy Adler, quoted by Marie-Joelle Browaeys and Roger Price, 2008)

As the lines above have shown, the specialized literature offers various definitions of cross-cultural management, each of them created based on the topic studied by the respective researcher, the depth of their interest, the information encountered and so on. Some definitions, as is the case of Shonhiwa (2008), are simplistic and limited to mentioning the scope of cross-cultural management. Other definitions nevertheless, like Adler's (Browaeys and Price, 2008), are more comprehensive and include not only the end scope of cross-cultural management, but also offer details of how the objective would be attained. This definition for instance mentions that cross-cultural management seeks to identify cultural differences at the business level, to compare them, to understand them and to use them in the construction of solid partnerships with various stakeholder categories. In all of the definitions nevertheless, the underlying explanation of the concept revolves around the existence of cultural differences and the need to recognize and integrate them within the business act.

Aside from these, other sources do not strive to define the concept of cross-cultural management either because they find it as self-explanatory, either they focus on other aspects of cross-cultural management. Elizabeth Bernhard and Joseph A. Cook (2011) discuss the five principles of an effective cross-management program. These revolve around:

Awareness of cultural differences

Development of the globally diverse workforce

Adequate selection and integration of the executives

Acknowledgement of challenges, and Multicultural team building (Bernhard and Cook, 2011).

Rahul Hameed (2010) created a more schematic approach to cross-cultural management. He virtually pointed out the steps considered effective in the creation of a successful cross management program and integrated them in a diagram. These steps include the asking of questions, flexibility, honesty, respect, recognition of the complexities and several others, presented in the diagram below:

Source: Hameed, 2010

2. Cross-cultural management in Russia

Business relationships between Russia and economic agents in the Western Hemisphere are tense, revealing as such the limited application of cross-cultural management in the creation of the partnerships. What has to be noted is that the Russian entrepreneurs and state representatives expect the foreign counterparts to be sympathetic and compliant to the Russian ways, yet they will not make efforts to meet those counterparts half way and compromise upon any issues.

The Russian parties as such tend to perceive the western business partners as arrogant and unable to adapt the business solutions to the specifics of the Russian economy. They perceive the westerners as hung up on the limitations of the Soviet Union and striving to impose their values upon the Russian firms:

"Western consultants were perceived as ignorant, lacking a Russian perspective and inclined to find economic solutions to problems which Russians see as economic and social and cultural. They assumed too readily that privatized enterprises were now concerned to increase shareholder value. Yet, that did not figure so much in Russian managerial thinking. Hence, Russian clients felt that the consultants were using economic criteria and rationale, which might be fine in a Western market economy, but which patently did not work in Russia especially now. This was seen as high-handedness and it went hand in hand with a Western reluctance to recognize that there had been industrial achievement during the Soviet period" (Holden, 2002).

Aside from these perceptions, the Russian businessmen believed that the Western parties had an ulterior motif -- namely that they were spies. Also, they felt that the consultants tended to complicate simple things and to leave out complex issues or only briefly mention them. Nigel Holden ultimately points out that when the Western parties entered the Russian business climate, they did not adequately apply the concepts of cross-cultural management. This eventually materialized in them being unfavorably perceived by the Russian counterparts and as such generated in failures to create solid business relationships. Holden explains that this attitude of the Russians is pegged to the history of the country, which has several times been betrayed by the West. Robert D. Hisrich, Branko Bucar and Sevgi Oztark (1994) however forwards a different theory, according to which differences in managerial decisions as well as perceptions are given by fluctuating ethical values across the countries.

Jerome Dumetz takes a more personal and detailed approach to cross-cultural management in Russia. The editor at Going Global writes his comments based on first hand observations as a result of actually living in Russia and interacting with the people, understanding the culture and first hand experiencing various situations. This context offers his work a significant advantage comparative to other sources which would either assess the Russian context through secondary sources, or which could integrate bias and stereotypes.

From the standpoint of the first hand experiences lived by Dumetz, the following are noteworthy:

The Russian culture is complex and seldom fully understood by the foreigners. This context creates frictions and inefficient cross-cultural management, despite an initial desire to be sensitive to the cultural context

Communications in United States differ from the communications in Russia as the contexts are dissimilar and the baggage of the communication is different

Hierarchy is more important in Russia than in the United States

Verbal communication is Russia is less important than in other global regions. With the use of words, the Russians might say one thing, but their body language will say the opposite. The final response -- or the hint to be understood by the counterpart -- is that offered by the body language.

Ultimately, Dumetz militates for a more in depth look at the Russian culture and argues on the importance of cultural adaptation to business situations:

"A new field of business management can help in understanding the hidden layers of the Russian culture: cross-cultural management. Composed of a bit of anthropology, a bit of sociology and a lot of management theories, this new field helps understanding why the culture is different" (Dumetz).

And in order to improve the application of cross-cultural management in Russia, Dumez argues that it is first necessary to self-educate oneself regarding the Russian culture. Then, it is imperative to keep an open mind and stimulate and engage in communications. Finally, it would be useful for the international companies operating in Russia to develop and implement training programs by which cultures are better understood and respected. While these recommendations are useful, they do not paint the picture of a perfect means of dealing with cultural diversity. Specific programs of cross-cultural management have to tailored to the particularities of each situation (Dumetz).

3. The case of McDonald's Russia

However deeply criticized for promoting an unhealthy life style through junk nutrition, from a business standpoint, McDonald's remains a symbol of success. The company penetrated the Russian market immediately after the fall of the Soviet Regime and as such gained access to a deprived population, craving for modernization. During 1990, other fast food chains had not penetrated the Russian market and McDonald's benefited from being the first present in the market. It gradually capitalized on a wide array of opportunities offered by the enclosed economy, but was also faced with the necessity of dealing with several barriers, such as increased corruption or a tedious legislative process (Francis, 2008).

McDonald's encountered numerous cultural barriers as well. For instance, upon the launch of the Big Mack (Big Mak in Russia), the clients, unaccustomed to finger food, did not know how to eat the sandwich. One man came to eat it with a spoon, while others took it apart and ate layer by layer (McDonald's Website, 2011). Another cultural barrier encountered was the sense of pride and the general reticence with which the Russians perceived the Westerners. In order to reduce this negative perception, the managerial team at McDonald's implemented two strategies

Donating part of the revenues cashed to charity causes (McDonald's Website) and Collaborating with local providers to get fresh produce but also to produce the food items (Kramer, 2010).

Both of these strategies were aimed at creating a favorable public image for McDonald's. This image would present a company focused on the well-being of the community in which it operated, and it would create the benefits of populous acceptance and higher demands for the products served.

Another cultural element to which McDonald's responded in an efficient manner is represented by the low incomes of the domestic population. In this order of ideas, despite the overall economic strength of the country, the Russian people continue to live in difficult conditions. Where the average income per individual in the United States is of $47,400, the income per capita of Russian is of $15,900. 13 per cent of the people (an estimated over 18 million people) live below the poverty line (Central Intelligence Agency, 2011). In this climate, people strictly control their costs and look for nutrition alternatives which are cost efficient. McDonald's has provided the Russian customers with an option for cheap food, served in clean locations, responding as such to an important cultural need (VOA News, 2010).

At the level of the customers, one of the most important change was represented by the adaptation of the menu to meet the specific preferences of the local culture:

"McDonald's offers a series of signature items that are served in restaurants all over the world. To enhance the local food preferences, McDonald's Russia have included potato wedges, cabbage pie and cherry pie. In the year 2005, McDonald's initiated breakfast menu and stronger coffee at different locations in Moscow that enabled commuters who left early for work, to avoid traffic and eating out" (Krishnani, 2011).

Today, while still encountering the difficulties of the Russian market place, such as corruption or a complex bureaucratic system, McDonald's is enjoying a presence of over two decades in the country. And it intends to further increase is popularity within the country by increasing the number of stores. In 2010 for instance, the company allocated budgets to increase the number of its stores in Russia by 15 per cent (Team, 2011). Ultimately, the success of McDonald's in Russia is the result of an increased ability to understand and adapt to the local culture, materialized in the development and implementation of a comprehensive cross-cultural management program.

4. Cultural aspects of doing business in Russia

In order to adequately apply the concepts of cross-cultural management in Russia, it is first necessary to understand the country at both an economic level, as well as at a cultural level. Russia is the seventh largest economy of the globe, with a gross domestic product for 2010 of $2.229 trillion. It 2009, Russia was the largest exporter of natural gas and the second largest exporter of crude oil. This translates into an increased dependence on exports, feature which has made Russia highly sensitive to the recent financial crisis. The government has intensified its efforts to reduce the dependency on exports, but the results have been reduced so far.

Russia has been traditionally enclosed, with the economic principles of the Soviet Union being those of economic isolation. After the fall of the regime however, the state commenced an extensive process of reformation -- numerous state-owned enterprises were privatized, international investors were attracted and international trade opportunities were pursued. In spite of these developments nevertheless, Russia remains highly controlled and planned, with governmental intervention in the economy continuing to be intense. Additional problems faced by the Russian business sector include "a shrinking workforce, a high level of corruption, difficulty in accessing capital for smaller, non-energy companies, and poor infrastructure in need of large investments" (Central Intelligence Agency, 2011).

The Central Intelligence Agency is one of the most reliable sources of information when conducting country analyses. It presents relevant, reliable and up-to-date information, but the limitation is that the data it provides is highly technical. When assessing the cultural dimension of a state then, it is required that other sources be consulted. A relevant alternative to cultural information is represented by the Kwintessential website. The source informs that the culture in Russia is focused on patriotism and national pride.

The Russians admit that their lives are difficult, but take pleasure in the fact that they function in those conditions in which others could not. The Russians are proud of their cultural heritage and expect the rest of the world to also admire it. At the level of the families, these are dependent on all members to contribute. 2 or 3 generations commonly live in the same apartments and families do not normally have more than one or two children. Women work outside the home as well, but they bare the sole responsibility for the household chores and the raising of the children.

At the level of the cultural dimension of doing business in Russia, the Kwintessential website informs on the following:

Connections -- namely people placed in high positions -- are essential to succeeding in Russia

It is not required that personal and long lasting relationships be developed between the parties, but patience and formality are required

Sincerity is essential; a sign of having built a successful business relationship is that of being asked for a favor by the other party

Meetings are scheduled ahead and confirmed several times; May is filled with celebrations and should be avoided; organizing a meeting with a government official takes at least six weeks

Meetings can be canceled and schedules can easily change; launching business is tedious and meetings can often be interrupted or taken off track