Return to Home Page Hofstede and Negotiations Paul Herbig Executive Summary Culture has been defined as the attitudes, beliefs and values of a society. It is something people learn as they grow in their environment. Similar environments provide similar experiences and tend to shape similar behaviors. People from the same culture behave differently not even mention those from different culture backgrounds. Due to the drastic growth in international trade, the understanding of different cultures become more and more critical and essential. In cross cultural negotiations, potential for miscommunication and misunderstanding is great. Cultural interpretation and adaptation are prerequisites for international business practice, especially for achieving a win-win relationship in cross cultural negotiation. Hofstede’s four cultural dimensions will be used to explain the difference among cultures. Hofstede divided cultures into four catalogs which are individualism, femininity vs. masculinity, power distance and uncertainty avoidance. Some other dimensions will also be used as tools for further analysis which are attitudes toward time, deal versus relationship focused, formality of culture and expressive versus reserved culture. Five countries will be studied which are Japan, Germany, Mexico, Canada and India by using and integrating all the theories. The objective of this paper is to prove that culture differences do have influences on negotiation behavior, but neither Hofstede nor other theories can exactly predict how negotiators will behave. Some of the findings do contradict with theories since every culture has its unique characters, such as Japan is a masculine society which usually mean Japanese negotiators are aggressive, assertive and task oriented, but in the real world, they are modest, indirect and relationship oriented; usually high power distance countries are more formal than low power distance countries, however, this doesn’t apply to Germany. Introduction Webster defines negotiation as: “To communicate or confer with another so as to arrive at the settlement of some matter.” Just like language is a basic communication tool in our daily life, negotiations also happen everyday, to discuss what to eat for dinner, where to go for weekends are all negotiations. Business negotiation tends to create the image of a smoky room full with people in suits and ties bargaining for what they want. While there has been a huge amount of change in business negotiations, the basic rules remain the same (Potts, 1996). Negotiators need to be clear about what they are after, know what their strength is. Usually, within the same culture, men and women have a different way to present the idea, to express themselves and have different approaches to solve problems. The situation will be worsen if they are coming from different culture backgrounds. Today, international trade has assumed an important role to the global economy, the volume of international trade has increased drastically during the last two decades. When international negotiation takes place, that means two businessmen from different cultures are trying to set a deal, they will need to overcome a lot of obstacles before they can reach the final agreement. In fact, culture is one of the most critical factors influencing decision making in international negotiation. It helps managers in the negotiation to identify the common goals to achieve between the two parties. If you do not understand the nature of the cultural difference, then, you tend to be obsessed with your own goals and become blind to the common goals and ideals. If the other side behaves against your expectation, you will start blaming your counterparts, as liars, illogical fools, idiots and "unfair wrong doers". Your counterparts will do the same and the result of the negotiation will leave a bitter after taste. (Common Problems in Cross-Culture Negotiation, p.1) The greater the cultural differences, the more likely barriers to communicate. Cultural interpretation and adaptation are prerequisites to the understanding of national and international business practice (Morden, 1995), especially if the intention of a negotiation is to achieve a win-win relationship, rather than a win-lose relationship. The purpose of this paper is to explore some of the issues in international negotiation by applying Hofstede’s culture typology. Hofstede examined international differences in work-related values and divided it into four dimensions which are individualism, femininity vs. masculinity, power distance and uncertainty avoidance. The study will try to prove some of the dimensions are interrelated to each other by analyzing five countries which are Japan, Germany, Mexico, Canada and India. Hofstede’s Four Cultural Dimensions Individualism Individualist cultures are those where individuals are concerned primarily with their own interests. People are more or less on their own and are expected to take care of themselves. American culture is a typical example of individualism. Once the kids grow up, they are expected to leave the parents and live on their own, and they do not assume the responsibility of taking care of their parents. It is the same as in business practice, most managers make decisions on their own instead of asking for other people’s opinion. In general, individualistic countries have more wealth than collectivist countries with the exception of Japan (Kale, 1991). In collective societies, everybody belongs to a certain group. This group protects its “member” and expects their loyalty as return. The society also valued family and harmony very high. The typical example will be Japanese. All the employees have loyalties to the company, they work hard for the company (group) benefit, and the company hire them for life time as a return. Usually, people from individualistic culture are not comfortable of working with others. American will have to learn how to work in a team, because each team member see themselves more as an individual than as a part of a team. Therefore, team in a individualistic culture will not be as cohesive as it is in collective culture. Also, since in individualistic culture, individuals are concerned primarily with their own interest, thus they are more task oriented compared to collectivism cultures. Masculinity versus Femininity The predominant pattern of socialization is for men to be more assertive and women to be more nurturing. Masculinity societies are more assertive, aggressive and competitive. They value material success more, whereas feminine culture tend to place more value on qualities. In masculine countries, work plays a main role in people’s lives, achievement is defined in terms of wealth and success. In a feminine country, work is less central, people prefer to work less hours rather than more salary, achievement is defined in terms of human interactions. Hence masculinity cultures are more materialistic while feminine cultures are more environmentally concerned. In U.S., boys and men tend to be more assertive; girls and women are more sensitive to social interdependence (Hofstede, 1980). The stereotype of the successful manager in this culture is a masculine one. The good manager is aggressive, competitive. The very expression of emotion is widely viewed as a feminine weakness that would interfere with effective business processes (Hofstede, 1980). A female manager probably will not perform as well as male manager in masculinity culture, especially in the Arabs countries, since in Muslim countries women have lower status than men. Hofstede also suggests that feminine countries tend to be successful in the service sector and consultancy. Negotiators from a masculinity culture are more aggressive and assertive compared to those from femininity cultures which value more on mutual gains and long term associations. Power Distance Power distance measures human inequality in organizations. Cultures with a low power distance views everybody is equal, people tend to respect individual. In high power distance culture, people tends to accept inequality in power and authority. The lower education, lower-status occupations tend to produce high power distance and the higher-education, higher status occupations tend to produce low power distance (Hofstede, 1980). Education seems like the dominant factor. In most European countries, managers usually have a college degree. Economic condition seems to be another indicator for power distance. In general, poor countries tend to be high power distance, while wealthy countries tend to be low on power distance. In Kale’s study, he stated: It is interesting to observe that, in Hofstede’s sample almost all poor countries tend to rate high on both collectivism and power distance (Kale, 1991). People are status concerned in high power distance countries. Again let’s use decision making process as an example. In low power distance country, employees prefer a “consultative” manager and managers take subordinates’ suggestions into consideration when they make a decision, whereas in a high power distance country, employees are perceived afraid they usually have to agree with their supervisors’ decisions. Hofstede believes that: Where superiors maintain a smaller power distance, subordinates tend to prefer the consultative decision style; this can be interpreted as an interdependence between superior and subordinate. This interdependent relationship is more in line with the requirements of modern work organizations as complex systems (Hofstede, 1980). There are some interesting relationships existing between individualism and power distance. Collective countries tend to be large power distance whereas individualist countries are low power distance. Uncertainty Avoidance This is the extent to which those in a culture become nervous by situations that are unstructured and unpredictable. Low uncertainty avoidance cultures tend to have fewer rules and more acceptance of diversity of thought and behavior. On the other hand, high uncertainty avoidance cultures try to minimize the anxiety with a thorough set of strict laws and behavior norms, they tend to resist changes and fear of failure. According to Hofstede, the faster economic growth is correlated with higher uncertainty avoidance (Hofstede, 1980). Hofstede also stated in his book: Uncertainty-avoiding rituals in organizations do not make the future more predictable, but they relieve some of the stress of uncertainty by creating a pseudo-certainty within which organization members can continue functioning. To the category of uncertainty avoiding rituals we can count the following items. inty avoiding rituals we can count the following items. 1) 1) Memos and reports Memos and reports 2) 2) Certain parts of the accounting system Certain parts of the accounting system 3) 3) A considerable part of planning system A considerable part of planning system 4) 4) A very considerable part of control systems A very considerable part of control systems 5) 5) A final uncertainty ritual is the nomination of experts (Hofstede, 1980) Most likely, one can say that low uncertainty avoidance countries tend to be less emotional and more tolerant, whereas high uncertainty avoidance cultures appear to be emotional, security seeking and intolerant. Again, using Japanese decision making as an example. Hofstede believes that group decision making can be seen as a way of avoiding risk for the individual, because they like to work in a group, and if the decision went wrong, the whole group took the responsibility instead of any individual. In general, compared to high uncertainty avoidance cultures, innovations and new ideas are more appreciated by low uncertainty avoidance culture where there are less rules and disciplines. Negotiators from high uncertainty avoidance countries tend to be more detail oriented than those from low uncertainty avoidance countries. Other Dimensions Except Hofstede’s four culture dimensions, there are also some other dimensions which have influences on business (negotiation) behavior. They includes different attitude toward time, relationship versus deal focused, formal versus informal culture and expressive versus reserved culture. Attitude toward Time Due to the value differences among different cultures, people has different way of looking at time and scheduling. In rigid time society, punctuality is critical. Monochronic is the term for these clock- and schedule worshipping cultures. German will be a typical example of monochronic society. They usually show up for their appointment on time and somehow they might be a few minutes early. Japanese also value punctuality and strict adherence to schedules (Gesteland1996). In contrast, in fluid time societies, which can also be called as polychronic cultures, people pay less attention on strict punctuality and are not particularly obsessed with deadlines. Like most Latin American countries, business meetings are usually started one or two hours later than it scheduled. Most likely, developed countries tend to be monochronic, whereas most developing countries are polychronic. Sometime, the orientation to time can vary from different areas in the same countries. Using U.S. as an example, in New York, you can usually see people walk faster compared to people in Houston, even both are big cities. Geographic location also seems as a major factor, clocks tick differently in warm climate countries. Therefore, if one negotiation team is from monochronic culture and the other is from polychronic culture, the value differences of timing might cause misunderstanding between two teams. Relationship Focused versus Deal Focused Relationship-focused people prefer to do business with friends, families, and persons well known to them. They always want to know their business partners very well before talking business with them (Gesteland, 1996). The business relationship is based on trust, and networking is very essential for doing business in these countries. Most likely the individualistic cultures tends to be deal focused whereas collective cultures are more relationship focused. Somehow this is also related to the masculinity and femininity, people from masculine cultures tend to be more deal focused compared to those from feminine cultures. People of the deal focused culture - north Americans, northern Europeans and Australians - are relatively open to do business with strangers. To them, business has nothing to do with their private life. On the other hand, the Arab world, most of Africa, Latin America, and most Asian countries are strongly relationship-focused cultures. For those countries, relationship goes first. Get to know the pattern and establish some kind of trust and friendship is very essential to a relationship focused culture. In general, relationship focused or deal focused is somehow related to the economy of the country. Most developed countries tend to be deal focused while most developing countries are relationship focused. Formal versus Informal Business Culture In formal business culture, most of the organizations are in steep hierarchies, people are more status and power conscious than those from informal business culture where everybody are viewed equally. Most of Asia, Latin America, Europe and Arab world can be categorized as formal business culture. Respect is very important in formal business culture, how you address a person is one of the important way to show your respect to northern Europeans. For example, in Germany, most of the people prefer to be addressed by their last name , doctors are addressed as “Mr./Mrs. Dr. …”, while in informal business culture, such as U.S. and Australia, people call each other by their first name. Dress code can be another way to reflect the formality of the culture. Usually Europeans will not wear sweat shirt and pants to go out, not even to the grocery store, but in U.S. you see people wear slippers and shorts at everywhere. Even in a theater in U.S., it should not be a surprise if you see somebody wearing jeans and T-shirts. Formality of culture seems related to Hofstede’s power distance theory. Formal business cultures tend to have large power distance in their organizations, while on the other hand, informal business cultures are more likely to be in low power distance countries. Expressive versus Reserved Culture A major misconception about nonverbal messages is that they are universally understood. Even if they do not speak a common language, they can supposedly communicate with foreigners on a rudimentary level by utilizing nonverbal channels (Kublin, 1995). Latin Europe and the Mediterranean area are among the world’s most expressive cultures while Asia, Nordic and Germanic Europe are the most reserved. Hand shake, eye contact, comfort distance, and touch are some of the sub-categories for nonverbal communications. In Germany, a soft handshaking will be interpreted as weak, but in most Asian countries, gentle handshaking is a way to show politeness and respect. But in Japan people bow instead of shaking hands. In Muslim, Hindu, and Buddhist cultures, you only shake right hand, since the left hand is using for the toilet and considering dirty. In highly expressive culture, intense direct eye contact can be expected whereas in reserved culture, people feel more comfortable with moderate to indirect eye contact. Kublin defines comfort distance as: Comfort distance is the distance, more accurately the range, at which people feel comfortable interacting with one another. The distance varies from one culture to another. Other factors determining comfort distance include the respective ages, status, genders of the participants, and the context. (Kublin, 1995) Comfort distance can also be called as “space bubbles.” Most of the Arab countries, Latin Europe, and Latin America prefer 20-35 cms distance while most Asians, North Europeans and North Americans are comfortable with 40-60 cms. Touch behavior regarded as proper in one culture may be quite inappropriate in another. In some culture, people rarely touch one another unless they are relatives or friends. Other cultures are on the opposite side. According to Kublin: Eastern and southern Europeans, Latin Americans and Arabs tend to be physically demonstrative, whereas northern Europeans, Japanese, Chinese and Southeast Asians usually are not. Americans tend to fall in the middle (Kublin, 1995). People from France and Latin American countries kiss each other on the cheek while they greet each other. Some other countries rub noses when they say “Hi”. Most southeastern Asian countries only shake hands. If you try to say “Hi” to a Japanese woman by kissing, she might get frightened, since Japanese is a low contact culture and they usually bow at such occasion. Silence can also be interpreted in different ways. To Americans, silence means something is wrong in a conversation (Hawrysh, 1989), however in Japan, it is the way how people talk. Graham and Herberger believe that US executives are uncomfortable with the silent periods and many admitted to their attempts at filling the gap with conversation or offering another deal with better price (Graham, 1983). Therefore, Japanese already have the advantage during the silent period without using any negotiation strategies. Applications Country Analyses Five countries will be analyzed in this section, they are Japan, Germany, Mexico, Canada and India. The following table shows the score of these five countries in Hofstede’s four dimensions. Table 1: Values of the Four Dimensions Power Distance Uncertainty Avoidance Individualism Masculinity Canada 39 48 80 52 Germany 35 65 67 66 India 70 40 48 56 Japan 54 92 46 95 Mexico 81 82 30 69 Source: Culture’s Consequences: International Differences in Work-Related Values, 1980. Japan Over two-thirds of US-Japan negotiation efforts fail even though both sides want to make a deal. Cultural differences are the major barriers to a successful agreement (Herbig, 1991). According to Table 1, it shows that Japanese is a collective and masculine society. It has medium to high power distance and high uncertainty avoidance. Due to its collectivism, Japanese is a relationship focused culture, but at the same time it is monochronic. Also because of the medium to high power distance in society, Japanese can be categorized as a formal business culture. In Mintu’s study, it proves that Japanese negotiators are more relationship and future oriented. In order to start a long term business relation with a new customer, a Japanese manager will not hesitate to offer a strategic price, in another word, they are willing to cut price to a business partner because they look to the future and broader pictures (Mintu, p.92). The Japanese decision making process is called ringi. Unlike American, Japanese takes time to make an initial offer and when they do, it usually gets approved by all the members in the team and includes all the details and major issues. Moreover, once the offer is made, the Japanese are less likely to change it until the final agreement is imminent (Hartfield, 1991). People are usually status concerned. The Japanese negotiation team usually has a leader from a higher level. This person will overlook the whole negotiation process without being notice as a leader by the other party. Face saving is very important since Japanese value harmony. There is a Chinese proverb, Da-Tong-Shao-I, originally quoted from “Chuang-zi”, a Chinese thinker and philosopher around 4 to 3 century BC. Literally it means “big sameness, small difference.” However, the original meaning of it is to concentrate on the common goal. It is a often used proverb in Japan when there is a need to resolve conflict of interests or to reach a mutual agreement (Dai-Doo-Sho-I, p.1) Japan is also a low-contact and reserved culture. Unlike most other western countries, Japanese are very modest, lovers do not kiss in public, businessmen do not tap each others’ shoulder. Body language is very restrained, formal, with small gestures. Japanese does not like direct eye contact, and they get offended if you look them straight into their eyes. According to Hofstede, Japan is not a high power distance countries which is not expected. Usually, subordinates will take order from their superiors, this will normally give people the impression of high power distance. Also, since Japanese is a masculine country, theoretically, Japanese negotiators will be aggressive and assertive, but in the real business world, most Japanese are very modest and indirect. Germany According to Hofstede, German has high power distance score, therefore, the culture is very status concerned. Most likely Germans are uncomfortable with uncertainty, and they are individualistic. Germans like to set rules and stick with them. Even though their uncertainty avoidance are not scored as high as Japanese, they do not feel comfortable if they do not have fully control over the situation. Privacy is very important to Germans. Most German managers have their own office and the door is always closed. Houses in German are far apart from each other, so the neighbor will not be able to look at your backyard. Based on Hofstede’s study, German culture is relatively masculine. Women are paid lower and tend to be in less prestigious and fulfilling jobs (Henden, 1996). The stereotype of manager will be a thirty five years old male with a college degree. In general, Germans are very straight forward and they pride themselves on speaking their mind (Gesteland, 1996). Germany is a monochronic culture. Punctuality is highly valued, schedules, and meeting agendas are strictly followed (Gesteland, 1996). Since German is an individualism culture, they tend to be deal-focused in business. German society retains a certain level of social formality which also has an impact on business protocol. Formal behavior is a way to show appropriate respect to people with high status, especially in southern Germany. One can expect to work with a German business partner for many years and still address him by last name. Germany can be considered as a wealthy country with a highly-educated workforce, therefore, according to Hofstede it is a low power distance country even though they are status concerned, they have formal business culture. Mexico Hofstede believed that Mexican culture is high power distance, high uncertainty avoidance, masculine and collective. Because of the masculinity, Mexican men are not used to dealing with female executives. Like most other Latin American countries, Mexicans are family oriented and expressive. Due to their collectivism, most Mexican businessmen are relationship focused. In the business relation, they prefer to start business by establishing a good relationship with their patterns. Mexicans value deep, long-lasting relationships. “Who you know” is one of the major factor to succeed in Mexico. Since Mexicans are family oriented, do not expect absolute punctuality in Mexico. This is because Mexicans do not value time as a valuable asset as North Americans do. Local Business people may be half an hour to an hour late, while visitors are expected to be on time (Gesteland, 1996). Mexicans take their time coming to a decision on your proposal, so it will be wise to give a deadline earlier than your target date. Mexicans are expressive. Their comfort distance is smaller than North Americans, they tend to stand and sit closer to others and use frequent hand gestures when they talk (Gesteland, 1996). Like Germans, Mexicans address people by using their titles and family names to show their respect, this shows the formality of Mexican culture due to its high power distance. Even though Mexicans are masculine, they are relationship focused, this might due to the collectivism in the society, since family has been valued highly in the society. Canada Canada is a bilingual and bicultural country. The major cultural groups includes the Francophones and the Anglophones (Mintu, 1991). In Mintu and Calantone’s study, they stated: In particular, French Canadians have been criticized for their work ethic in favor of their families. For example, they would forego additional responsibility and achievement in favor of activities related to the building of a social image. Conversely, English Canadians are more achievement oriented and competitive (Mintu, 1991). Since the majority of the population speaks English, and also due to the limitation of the resources, only Anglophones will be used in this paper. Canada and Mexico scored totally different on Hofstede’s four culture dimensions. Compared to Mexico, Canada has lower power distance which means it has an informal business culture. Canadians tend to be more individualistic, therefore, it seems like Canadians are more deal focused. Canadians are uncomfortable with uncertainty, and also they are less masculine than Mexicans. Most Canadian can get down to business at the first time when they meet their partner. To them it is unnecessary to know their counterpart and build a relationship. They tend to trust their partners unless they are proved to be unreliable. Canadians value punctuality, since time is money to them. Compared to north Europeans and southeast Asians, Canadians are expressive, but compared to Latin Americans, Canadians are reserved. Somehow, referring to Table 1, Canadians score the lowest in masculine, which means they tend to be more femininity however they are deal focused instead of relationship focused. India According to Hofstede, Indians rank high in power distance, which means they perceive great power distance, however, Indian manager tends to underplay the use of power and instead prefers to utilize a consultative approach to managing employees. (Hader, p.12) Due to the caste system existing in the society, Indians are status conscious. They often associate high status with high authority. Like most other Asian countries, India is a collective society but surprisingly unlike Japan, Indians are not masculine. Indian negotiators are strongly relationship focused due to its femininity culture. In India, you need to make a friend before you can make a deal (Gesteland, 1996). Once a good relationship is established, the negotiation process can begin. Be prepared that Indian negotiators bargain longer, are more competitive and maximized their gains relative to US (Hawrysh, p.29). Also, be careful, sometime Indian negotiators will play their poverty card to get a better deal. Due to its geographic location, Indian tends to be polychronic. An appointment with a senior official will usually be delayed for half an hour to an hour without the courtesy of an apology (Gesteland, 1996). Like most of their neighbors in South and Southeast Asia, Indians consider people and relationships more important than schedules and deadlines. India is the only country where every suppositions holds true. Conclusion The following assumptions hold for all five countries: The following assumptions hold for all five countries: •• In collective societies, team work is more cohesive; In collective societies, team work is more cohesive; •• Education level and economic condition are related to power distance. Highly educated and wealthy countries have low power distance, while low educated and poor countries usually have high power distance. Education level and economic condition are related to power distance. Highly educated and wealthy countries have low power distance, while low educated and poor countries usually have high power distance. •• Individualism countries tend to be more task oriented (deal focused) than collectivism countries. Individualism countries tend to be more task oriented (deal focused) than collectivism countries. •• Low power distance countries are usually individualistic while high power distance countries are collectivism. Two assumptions hold in some countries but not in others. Two assumptions hold in some countries but not in others. •• Femininity countries are usually relationship concerned, whereas masculinity cultures are deal focused. This is only true to India. Femininity countries are usually relationship concerned, whereas masculinity cultures are deal focused. This is only true to India. •• High power distance countries are more formal than low power distance countries. This assumption holds to all countries except Germany. This is because Hofstede’s theory was developed about two decades ago, many of economic and political changes have influences on his theory. Japan, Canada and Germany may score differently nowadays compared to twenty years ago. References Anonymous. “Common Problems in Cross Cultural Negotiation”, http://www.ict.co.jp/japa- bus/cross-cul-negotiation.html. (Accessed: 02/11/97) Anonymous. “Dai-Doo-Sho-I”, http://www.ict.co.jp/japa-bus/daidoshoi.html. 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