corporate culture competitiveness the danfoss universe
DESCRIPTION
It seems clear that the leading organizations of the future will have to be perpetual learners, with great intercultural communication capabilities and an emphasis on unleashing human potential. Firms are shifting focus from the traditional and tangible resource factors of labor and capital to more intangible factors such as knowledge, top- line focus, consumer trust, brand and corporate image, social responsibility and organizational culture. This is reflected in a growing interest among scholars in fields such as Knowledge Management, Organizational Culture and Intercultural Communications.TRANSCRIPT
Sources of Corporate Culture Competitiveness: From Theory to Practice
3rd YeaAsian Studie
Copenhagen B
Knowledge Management – OrganizationaHuman Resources Management, a
Uriel Alvarado Sarah
Advisor: Lisbeth Clausen, IKL
June
l Culture – Intercultural Communications Case Study: The Danfoss Universe
r Project s Programme usiness School
Hempel Berat Zimberi
2005
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Acknowledgements
During the process of this project we received and combined knowledge from various
sources. We would like to thank all of those involved in the creation of this project.
Our thanks go to Noel Ryan and Gregers Baungaard from Danfoss who not only helped
us formulating the concepts, but assisted us with information and support throughout the
writing of the project. We would also like to thank the HRM department of Danfoss
headquarters and the staff of Danfoss K.K for their time and effort.
We would also like to thank Lisbeth Clausen, our advisor and teacher who provided us
with encouragement and inspiration throughout our studies at the Asian Studies
Programme and in completing this project.
We would finally like to thank Dana Minbaeva for taking the time to guide us with
excellent advice and insights into the field, which certainly added value to our project.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
1. Executive Summary .................................................................................................... 4 2. Introduction..................................................................................................................... 5 2.1 Thesis Structure ............................................................................................................ 8 Figure 1 ............................................................................................................................... 8
2.2 Research Issue........................................................................................................... 9 2.2 Research Question .................................................................................................... 9
3. Methodology................................................................................................................. 10
3.1 Research Strategy.................................................................................................... 10 3.2 Terms ...................................................................................................................... 12 3.3 Delimitation ............................................................................................................ 19 3.4 Theoretical Tools and Critique ............................................................................... 22 3.5 Data Collection, Resources, and Critique ............................................................... 30
3.5.1 Secondary data collection of related literature................................................. 31 3.5.2 Conduction of interviews with individuals related to the context ................... 32 3.5.3 Formulation of questionnaires ......................................................................... 32
4. Theory ........................................................................................................................... 33
4.1 Organizational Culture............................................................................................ 34 4.2 Intercultural Communications ................................................................................ 38 4.4 Knowledge Management ........................................................................................ 41 4.5 Conceptual Model................................................................................................... 48 4.6 Human Resource Management Practices................................................................ 51 4.6.1 Intercultural Training ........................................................................................... 55 4.7 Cultural Differences................................................................................................ 56
5. Case Study of Danfoss K.K ......................................................................................... 62 6. Discussion: Application of Theory to Danfoss K.K. .................................................... 67 6.1 Recommendations....................................................................................................... 74
6.2 Economic Considerations ....................................................................................... 78 7. Conclusion .................................................................................................................... 79 8. Indications for Future Research .................................................................................... 81 9. Bibliography ................................................................................................................. 82
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
1. Executive Summary The Danish MNC Danfoss presented the challenge of optimizing processes in their
Japanese subsidiary, Danfoss K.K. In light of interdisciplinary studies and an intercultural
phenomenon this project undertook the task of evaluating and combining current theories
in the areas of organizational culture, intercultural communications and knowledge
management to provide solutions and recommendations applicable and relevant to a
North European MNC operating in Japan.
This paper took a strategic approach to the analysis of the issues by viewing effective
knowledge management, intercultural communications, and corporate culture as both
potential sources of competitive advantage and as factors management can directly
influence through HRM practices. Competitive advantage gained is by harnessing the
unique knowledge existent in the organization. Theoretical review found that levels of
ability, motivation, opportunity, and integration can heighten the levels of social capital
and absorptive capacity and in turn knowledge transfer. Additionally an effective transfer
of core values through rich intercultural communications will improve knowledge
transfer and thus culture competitiveness.
In order to make the connections between the fields clear and to aid in providing a
comprehensive analysis this paper provides a conceptual model which illustrates the
connections between the fields of study, how they can be influenced, and to what effect.
The aim is to bring theoretical findings to a practical level that management can apply to
optimize their processes.
The empirical results revealed that Danfoss faces obstacles in the areas of motivation,
integration, ability, and lacks a comprehensive HRM system to effectively improve the
situation. Our recommendations to the company highlight their weaknesses, strengths,
opportunities and threats, and provide the HRM practices and strategies that will enable
them to optimize their processes in Japan, and create sources of competitive advantage.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
2. Introduction It seems clear that the leading organizations of the future will have to be perpetual
learners, with great intercultural communication capabilities and an emphasis on
unleashing human potential. Firms are shifting focus from the traditional and tangible
resource factors of labor and capital to more intangible factors such as knowledge, top-
line focus, consumer trust, brand and corporate image, social responsibility and
organizational culture. This is reflected in a growing interest among scholars in fields
such as Knowledge Management, Organizational Culture and Intercultural
Communications.
From the field of organizational culture we have been inspired by Edgar Schein who is
considered to be one of the founders of organizational psychology and defines
Organizational Culture as:
“A pattern of shared basic assumptions that the group learned as it solved its problems
of external adaptation and internal integration, that has worked well enough to be
considered valid and, therefore, to be taught to new members as the correct way to
perceive, think, and feel in relation to those problems1."
This definition includes the words (learning and teaching), (in a correct way), (in
relation to those problems) and leads to the question of how can the culture of a firm
become better in dealing with “those problems”?
Knowledge plays an important role in the culture of an organization, and the question
then becomes: how can knowledge be managed in an effective way in relation to the
problems that the firm faces in its context/industry?
The management of knowledge has grown in importance; and a large part of
management literature points to the effective management of knowledge as a qualifier for
1 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
enduring competitive advantage in multinational corporations (MNCs) (e.g. Gupta and
Govindarajan, 2000 et al)2.
The last underlying element in Schein’s definition is communication between the
members of the organization. Organizations are devoting substantial energy to mediating
and distributing knowledge, values, and experiences on a world-wide basis to create a
common “working culture”. When people face cross cultural encounters, communication
becomes more complex while companies search for the implementation of their core
values in new working contexts to create an effective working culture in the new cross
cultural communication arena. For this it is crucial that effective Intercultural
communications within the firm is in place.
From Theory to Practice
Strategy is never fixed in stone, no matter how brilliant it is.3
A strategy is built from vision and is designed for practicality. It is crafted rather than
prefabricated, and is constantly worked and reworked as the company goes along. 4
The Danish Company Danfoss presents us with a suitable case that allows for
investigation: a Multinational company already successful in knowledge sharing, facing
intercultural challenges in the context of its subsidiary in Japan (Danfoss KK).
In this project we do not intend to create a strategy from an outsider standpoint. Rather
we intend to present the situation from a neutral external perspective to be able to point at
sources of improvement by creating a theoretical model which could serve as a powerful
tool for the managers to build the most suitable strategy from an insider standpoint.
2 c.f. The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, Journal of International Business Studies, 34, 586-599, 2003, p.1 3 Business Strategy, An Asia Pacific Focus, 2nd Edition, Irene Chow, Neil Holbert, Lane Kelley, Julie Yu, Pearson Prentice Hill, 2004, p.50 4 IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
In today’s increasingly competitive environment MNCs need to adopt the mindset, skill
set, and tool set associated with unleashing human potential.
Human Resources Management practices “can contribute to sustained competitive
advantage through facilitating the development of competencies that are firm specific,
produce complex social relationships,... and generate organizational knowledge”.5
Thus it is relevant to examine the effects of corporate culture, intercultural
communications, knowledge management, and how these aspects can be influenced
through human resource management practices to create sustainable competitive
advantage.
5 Lado and Wilson (1994, p. 699), c.f, HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen, Denmark: Emerald Group Publishing Limited, 2005, p.2
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
2.1 Thesis Structure Figure 1
As presented in Figure 1(Project structure visualization which guides the reader through
the project, and demonstrates the connection between the sections and the project line),
this project follows a linear-analytic structure answering two different sets of the
questions “what”, “why” and “how”.
Succeeding the Executive Summary: Section 1, and Introduction: Section 2; the
Methodology: Section 3, explains and discusses the relationship between the research
issue, theory, and empirical data. It includes a description of the data collection method
with reference to the interview strategies and the questionnaire administered in relation to
the theory. It also provides a list of terms, a general literature overview, theoretical tools
and critique. Following this, the Theory: Section 4 sets out to explain the theoretical
approach which lays the foundation for the case analysis. It begins answering the “what”
question by introducing the relevant theories from the Organizational Culture,
Intercultural Communications and Knowledge Management fields and the “why”
question by explaining the usage of these. The product of the theoretical approach
capitalizes in the conceptual model which highlights the “why” and leads to the
examination of the “how” question. Subsequently, the relevant Human Resources
Management Practices are presented aiming to answer two of the second set of questions:
“what HR practices”, and “why these practices”. In a narrower perspective compared to
the first set of questions, some of the possible recommendations to the company arise in
the form of HRM practices theories. Cultural considerations are further presented in order
to discuss the implementation of HRM practices. The Danfoss Case: Section 5 provides
the reader with the company background and the challenges that its subsidiary in Japan is
facing. The case study then is analyzed in the Analysis: Section 6. We finalize the project
by answering the “how” of the second set of questions, namely how to implement the
relevant HRM practices, and presenting the conclusions: Section 7: Conclusion provides
a short summary of the study and the conclusions related to the effectiveness in the usage
of the conceptual model.
Conclusion
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Theory
Methodology
Introduction
Executive Summary
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
2.2 Research Issue In accordance with the scope of the Asian Studies Programme third year project criteria,
our project takes an International Management problem within the thematic framework of
“Organisations involved in international competition and/or co-operation in Asia”. From
a company-specific angle we analyze the circumstances of the Danish MNC Danfoss,
focusing on the Japanese subsidiary, Danfoss K.K. By applying interdisciplinary methods
involving social and economic concepts, we have commenced to research our issue of
interest:
From an international perspective what are some of the main aspects of corporate
culture, intercultural communication, and knowledge transfer that can affect the
optimization of processes within the MNC, and how can these factors be influenced by
HRM practices.
2.2 Research Question From this perspective we formed our thesis statement:
We expect to find that HRM practices can influence the transfer of corporate core values,
intercultural communications, and knowledge transfer.
In reference to the above we have formulated the following research question:
How can HRM practices help to maintain corporate core values, and improve
intercultural communications and knowledge transfer within Danfoss K.K. and
between Danfoss K.K and headquarters?
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
3. Methodology
Theory
Methodology
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Introduction
Executive Summary
We will explain the relationship between the research issue, theory, and empirical data.
The reader should then be able to understand the process followed in writing this project.
The methodology chapter includes research strategy, terms, delimitation, theoretical tools
and critique, and data collection resources and critique.
3.1 Research Strategy
Our research strategy followed primarily a deductive strategy as our theoretical findings
lead to the framing of the phenomenon we explored. Prior to the formulation of the
research issue, one of our team members was an intern in the subsidiary of study for 5
months. This observation period founded the basis of the preliminary study6. The first
stage of this period was to refine the faced phenomenon. During this period our team
member was presented with different surface issues possible for research by both the
president of Danfoss Asia and the president of Danfoss K.K. The key issue presented was
“optimizing processes in Danfoss K.K”. This was presented as an intercultural challenge,
and from this perspective we were faced with the questions what and how was the
Japanese subsidiary being affected. The questions “what” and “how” intercultural issues
are affecting operations and “how” Danfoss can improve this, directed us towards the
exploratory method. Saunders, Lewis and Thornhill note that the exploratory research
strategy involves qualitative analysis “…in order to conduct exploratory discussions… to
reveal the “what” and the “how”.”7 The exploratory research strategy was relevant to the
nature of our research, considering that there was not a specific task, but rather a
phenomenon to be explored and perhaps elucidated. This kind of research does not
necessarily provide a specific solution as specific problems that can be solved within the
framework of the research may not be discovered. We began by reviewing intercultural
communications and human resource literature. After completing our first interview with
Danfoss headquarters, we confirmed that HRM strategy, intercultural communications,
6 M. Saunders, P. Lewis, and A. Thornhill, (2000), Research Methods for Business Students, second edition, Prentice Hall Press, p . 21 Conclusion 7 IBID, p. 245
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
and cultural issues were all involved in affecting the operations of the Japanese
subsidiary including knowledge transfer both within the subsidiary and between
headquarters and the subsidiary. At the same time our theoretical reviews also lead us to
HRM strategy theory, which pointed us to the importance of organizational culture,
intercultural communications, and knowledge management as essential factors of
effective operations, and as sources of competitive advantage.
At this point we began the formulation of our research question, the creation of our
analytical framework, and the theoretical model we would be using. Our project framed
the evaluation of the faced phenomenon in terms of “what” “why”, and “how”. What
refers to the fields of study that were needed to optimize operations in Danfoss, why
refers to describing why the combination of these fields is necessary, and how refers to in
what way these fields can be affected to optimize operations. We found that through
strategically implementing HRM practices Danfoss can influence the necessary areas to
optimize operations. Thus, we extended our framework to include the “what”, “why”, and
“how” of HRM practices specific to our case. What refers to the HRM practices to be
considered; why refers to the conclusions of our theoretical findings which shows why it
is necessary to affect through HRM practices the set of fields chosen; and how refers to
the implementation of HRM practices in the cultural setting of Japan.
In order to describe the “why” in an in depth manner, we created a conceptual model
based on a broad theoretical review. This model combines the fields of organizational
culture, intercultural communications, and knowledge management. It additionally looks
at the determinants of effective knowledge transfer (ability, motivation, opportunity, and
integration: A-M-O-I). Our aim is to provide an analytical tool and framework that can be
used by management to analyze from an internal perspective. Our project’s contribution
is in the form of bringing “theory to practice” in an attempt to build on what has been
established in the fields of study.
Addressing our research issue demanded a complex analysis, in which several academic
fields have been combined while incorporating an International and Asian perspective.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Thus, throughout the writing of the project we have drawn on the knowledge acquired
through the courses taught at the Asian Studies Programme curriculum8. Our project is
based in the academic field of business economics/business management while
incorporating material from the Asian Studies Programme courses including first and
foremost the Intercultural Communications course and IBM (International Business
Management), as our project is deeply rooted in these fields; the organization course; the
International Economics and Competitiveness course; Japanese Economic Organization;
the Japan and Asia course; and the Interdisciplinary Research Methods I-III courses
which enabled us to utilize a scientific methodological approach in formulating the
research question and method. The combination of knowledge acquired enabled us to
employ an interdisciplinary approach in formulating and answering our research question,
thus fulfilling the third year project requirement of “formulating a multidisciplinary
question suitable for methodological analysis within the framework of a complex theme”9.
Theory
Methodology
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Introduction
Executive Summary
3.2 Terms
Multinational Corporation
According to the Blackwell Encyclopedic Dictionary of International Management
A multinational corporation is ‘a business enterprise that spans multiple nations.
MNCs have offices and/or factories in a number of different countries, usually
with a centralized head office where they coordinate global management.’10
Competitiveness
This project uses Jay Barney’s definitions of competitive advantage “when a firm is
implementing a value creating strategy not simultaneously being implemented by any
current or potential competitors”11 and sustained competitive advantage “when a firm is
8 “Students must demonstrate the skills taught in the Asian Studies Programme Curriculum”, Third Year Project Manual, Asian Studies Programme 9 Third Year Project Manual, Asian Studies Programme 10 (O’Connell, 1997:211), The Blackwell Encyclopedic Dictionary of International Management, John O'Connell, Blackwell publishing, 1998
Conclusion 11 C.F, Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005., p.7
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
implementing value creating strategy not simultaneously being implemented by any
current or potential competitors and when these other firms are unable to duplicate the
benefits of this strategy”12. Our conceptualization of competitiveness borrows from the
resource based view of the firm in that we focus on the internal strengths and weaknesses
of the firm, as opposed to the external opportunities and threats13. “This view assumes
that firms within an industry or group may be heterogeneous with respect to the strategic
resources they control, and that these resources may not be perfectly mobile across firms,
and thus heterogeneity can be long lasting” 14 , and therefore sustained competitive
advantage can be reached through the development of firm specific internal strengths.
Corporate Culture Competitiveness
We refer to corporate culture competitiveness as:
An organizational culture which aids in the achievement of sustainable
competitive advantage through the creation of firm specific, non transferable,
“intangible assets” that are in line with the strategy and goals of the organization.
Some of the factors that can influence the level of corporate culture
competitiveness, among others are knowledge management, intercultural
communications, corporate image, social responsibility, etc.
Organizational Culture
Organizational culture is a difficult term to define, and has a list of well known and
quoted definitions including those of Elliott Jacks (1952), Andrew Pettigrew (1979),
Meryl Reis Louis (1983), Edgar Schein (1985), John van Maamen (1988), Harrison Trice
and Janice Beyer (1993) etc15. For the purpose of this project we have chosen to use the
definition provided by Edgar Schein as his definition holds intercultural communications
and knowledge sharing as intrinsic to organizational culture. He views culture as “the
accumulated shared learning of a given group, covering behavioral, emotional, and
12IBID, p.4 13 Please see appendix for model of resource based and environmental models of competitive advantage, Barney 1991. 14 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management, 1991, Vol.17, No1, 99-120. P.3 15 C.F, Organizational Culture, Core Concepts of Organization Theory, Mary Jo Hatch, Intercultural Communications Compendium Asian Studies Programme, Lisbeth Clausen, 2003
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
cognitive elements of the group member’s total psychological functioning Schein (1997)
and defines organizational culture as
"A pattern of shared basic assumptions that the group learned as it solved its
problems of external adaptation and internal integration that has worked well
enough to be considered valid and, therefore, to be taught to new members as the
correct way to perceive, think, and feel in relation to those problems."
Schein conceptualizes organizational culture in three levels including basic underlying
assumptions, espoused values, and artifacts as presented in the model below. He also
writes that a “strong” organizational culture is identified by a high degree of homogeneity
and stability of group membership and length and intensity of shared experiences of the
group. Although, once an organization has developed a strong culture, as long as the
leadership remains stable it can withstand a high turnover of employees as they will
quickly be assimilated into the culture.
Levels of Culture
Unconscious, taken for granted belief, perception, thoughts, and feelings (ultimate source of values and action)
Espoused Values
Artifacts
Strategies, goals, philosophies (espoused justifications)
Visible organizational structures and processes
Basis Underlying Assumptions
Figure 216
16 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Core Values
This project uses Schein’s definition of espoused values in what we refer to as core
values. The core values of the organization, if viewed as espoused values are identifiable
in research and transferable across the organization. Although basic underlying
assumptions lay at the root of these values, they are difficult to define17, and are based on
the various histories and experiences of organizational members, and thus may not be
transferable across diverse cultures in the MNC. Espoused values define how one should
and should not act, they define the context in which organizational members express
themselves, and finally they are the means through which the basic assumptions are
reinforced or rejected and changed18.
Intercultural Communications
Intercultural communications theory was founded by Edward T Hall in the 1950’s based
on his studies of communication between Japanese and Americans 19 . Intercultural
communication can be simply defined as:
how people, from differing cultural backgrounds, endeavor to communicate.
Cross-cultural communication tries to bring together such relatively unrelated
areas as cultural anthropology and established areas of communications. Its core
is to establish and understand how people from different cultures communicate
with each other. Its charge is to also produce some guidelines with which people
from different cultures can better communicate with each other20.
Knowledge
Knowledge can be simply defined as “The capacity for effective action” (Seng, 2000:
5621). However, in order to clarify our use of knowledge, further explanation is necessary.
According to Straub-Bauer, this definition implies that knowledge is a) an active asset; b) 17 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.3-16, Organization Compendium, 2003 Asian Studies Programme 18 IBID 19 Edward T Hall and the History of Intercultural Communication: The United States and Japan, Everett M. Rogers, William B. Hart, Yoshitaka Miike, Keio Communication Review, No.24, 2002, Intercultural Communications Compendium, Lisbeth Clausen, 2003 20 Wikipedia online dictionary, http://www.wikipedia.org/ 21 C.F, Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.7
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
regarded as a process rather than an object; c) a product of human reflection and
experience; and d) dependent on context22. We view knowledge as the outcome of a
process which can be seen as an asset. This process is that of human reflection and
experience within specific contexts. Nonaka and Takeuchi differentiate information and
knowledge in this manner:
[I]nformation is a flow of messages, while knowledge is created by that very flow of information, anchored in the beliefs and commitment of its holder. . . . (K)nowledge is essentially related to human action23.
Additionally we see knowledge as not only being within the individual, but also as being
held collectively. Brown and Duguid (1998) refer to this as ‘communities of practice’24.
Thus knowledge within the organization can be the result of collective experiences and
reflections within the organizational context, which is thus context specific in that it
depends on the situation and is created dynamically in the social interaction between
people.
Knowledge Transfer and Knowledge Sharing
According to Minbaeva et al (2003), knowledge transfer is “a process that covers several
stages starting from identifying the knowledge over the actual process of transferring the
knowledge to its final utilization by the receiving unit”25. Knowledge transfer is often
used simultaneously with knowledge sharing26, which can be defined as “Providing one’s
knowledge to others as well as receiving knowledge from others (MANDI Questionnaire
on Knowledge Sharing, 2004)”27.ho As the concepts are used interchangeably in many of
our texts we will use the terms synonymously throughout this report, and when doing so
refer to our understanding of knowledge transfer and sharing as: the individual and
22 IBID 23 The knowledge creating company, how Japanese Companies Create the Dynamics of Innovation, Ikujiro Nonaka and Hirotaka Takeuchi, Oxford University Press, 1995 24 C.F, Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.8 25 MNC knowledge transfer, subsidiary absorptive capacity, and HRM, D Minbaeva, T Pedersen, I Bjo¨rkman, CF Fey, HJ Park, Journal of International Business Studies (2003) 34, 586–599& 2003 Palgrave Macmillan Ltd, p.2 26 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.8 27 C.f. IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
collective giving, receiving, and utilizing of context relevant human experience and
reflection between individuals and groups within the organization.
Social Capital
For the purpose of this project we focus on firm level social capital, and adopt the
specification of Nahapiet & Ghoshal who state that social capital is...“…the sum of the
actual and potential resources embedded within, available through, and derived from the
network of relationships possessed by an individual or social unit.”28
Absorptive Capacity
According to Cohen & Levinthal, Absorptive capacity is “the ability of the firm to
recognize the value of new, external information, assimilate it, and apply it to commercial
ends”29. This definition was criticized by Zahra & George for not capturing the dynamic
nature of the construct30. They redefined it as “a set of organizational routines and
processes by which firms acquire, assimilate, transform and exploit knowledge to
produce a dynamic organizational capability.” Zahra & George were able to add to the
specification of absorptive capacity by identifying its sub dimensions (acquisition,
assimilation, transformation, and exploitation), and by recognizing its dynamic nature31.
For this reason we will use this definition in this paper.
Trust
Trust is defined as “the willingness to be vulnerable to the actions of another party”
(Mayer et al., 1995: 712), where trustworthiness is “the quality of the trusted party that
makes the “trustor” willing to be vulnerable” (Levin & Cross, 2003: 3)32.
28 C..f. Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 29 Absorptive Capacity: A New Perspective on Learning and Innovation, Wesley M. Cohen and Daniel A. Levinthal, Administrative Science Quarterly, 35 (1990): 128-152 30 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 31 IBID 32 c.f. Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Integration
Integration can be defined as “The need to coordinate, adjust, and regulate relationships
among various actors or units within the system…in order to keep the system
functioning.”33 In other words, we see integration as the process by which individual
parts and persons within an organization are made into a functional and structural whole.
Motivation
“The concept of motivation refers to an individual’s selection of behaviors and what lies
behind making these choices…no matter what their nationality, cultural background, or
physical location, people are motivated by the desire and aspiration to fulfill needs, which
results in goals being accomplished”.34 Campbell et al. 1993 argue that motivation is
determined by the individual’s choice to perform, the level of effort, and the persistence
of that effort35. In this project we view motivation as the willingness of an individual to
achieve goals, participate in various activities and tasks and to interact with other
organizational members.
Opportunity
Angelos Alexopoulos and Kathy Monks refer to the opportunity to access useful channels
and utilize their resources36. We thus define opportunity as the opportunity to access
appropriate channels for communication where the transaction costs of communication
are low or non existent, and the opportunity for organizational members to meet,
integrate, participate in group activities and teamwork and thus transfer knowledge.
33 Sociological Theory and Modern Society, Parsons, Talcott, New York Free Press, 1967 34 Global management and organizational behavior, Konopaske and Ivancevich, McGraw Hill, 2004, p.164 35 C.F, Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 36 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Ability
Ability can be defined as “including certain human attributes like prior achievement,
initial skills, aptitudes, etc. The ability can/do factor usually denotes ‘a potential for
performing some task which may or may not be utilized’ (Vroom, 1996:198)”.37
3.3 Delimitation
Knowledge Transfer
Within the study of knowledge transfer there are sub categories including horizontal
knowledge transfer (between subsidiaries), vertical knowledge transfer (from
headquarters to subsidiary) and vertical reverse knowledge transfer (from subsidiary to
headquarters)38. Our project focuses on knowledge transfer within the subsidiary of study
and between the subsidiary and headquarters (vertical, vertical-reverse). Although
horizontal knowledge transfer is also important to achieve competitive advantages, due to
specifications of time, scope, and focus we delimitate this area of study.
Theory
Methodology
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Introduction
Executive Summary
Strategic Subsidiaries
The concept of strategic subsidiaries is highlighted by Lai Hong Chung, Patrick Gibbons,
and Herbert Schoch who state that
The organizational context of a MNC is shaped by factors such as the interrelationships between subsidiaries the environmental uncertainties, the size of the subsidiary, the subsidiary location, the nationality of the parent company and the cultural proximity of subsidiary to parent organization. Notwithstanding the effect of these specific contingencies on the design of control systems, it must be realized that subsidiaries have different strategic roles or mandates and therefore may require different controls39.
37 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, WP 14-2001 38Inspired by Dana Minbaeva, 2005: Strategic Management of Multinational Networks: A subsidiary evolution perspective, Ana Teresa Tavares, University of Porto, Faculty of Economics, 2001 39 Inspired by Dana Minbaeva, 2005: The Influence of Subsidiary Strategic Context and Head Office Strategic Management Style on Control of MNCs : The Experience in Australia, LAI HONG CHUNG, PATRICK T. GIBBONS, and HERBERT P. SCHOCH, Submitted to the Second Asian Pacific Interdisciplinary Research in Accounting Conference, Osaka, Japan, August 4-6, 1998.
Conclusion
19
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Although an important observation, due to specifications of time and scope we do not
include considerations of the strategic position of Danfoss K.K in terms of the entire
Danfoss organization.
Social Capital
Social capital has also been divided into external and internal social capital. External
social capital refers to the external linkages to other firms and institutions, and Internal
social capital refers to the linkages within the firm40. According to Adler & Kwon (2002),
a firm’s capacity for effective action is typically a function of both41. However, for the
purpose of this paper we will focus only on internal social capital due to the focus of the
research project. Additionally, social capital has been further divided into structural (the
impersonal properties of the network of relations), relational (the study of interpersonal
relations over time through trust, obligation, shared expectations, etc.), and cognitive
social capital (the label for such properties as shared meanings, language, symbols, etc.
across the members of a network)42. We do make some use of these categories, however
we do not discuss further the dimensions or their implications; as such a discussion
deviates from the objective of the project, and is not possible in regard to the scope and
time allocated to this project. Furthermore, it has also been established that there are
problems in measuring social capital. According to Rajesh S. Upadhyayula & Rajiv
Kumar social capital has been measured at various levels including nation, community,
and inter-firm and intra-firm, however they claim that “most of these measurements are
deficient in their ability to capture the constructs of social capital completely”.43 Thus we
have avoided attempting to measure social capital directly in our research and instead
have focused on some of the determining factors (A-M-O) of social capital which can be
more easily identified, tested, and influenced by HRM practices. This approach also
facilitates the usage of more practical recommendations to the firm, and provides
applicable data for analysis.
40Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 41 c.f. IBID 42 IBID 43 IBID
20
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Absorptive Capacity
As noted above we use the definition of absorptive capacity provided by Zahra & George,
however we delimitate their further suggested two dimensions of absorptive capacity (a.
Potential absorptive capacity (PACAP) which comprises of knowledge acquisition and
assimilation capabilities, and b. Realized absorptive capacity (RACAP) which includes
knowledge transformation and exploitation capabilities)44. When we speak of absorptive
capacity these concepts are inherent, however a full discussion of each of them will not
add significantly to our analysis due to specifications of time and scope, and would
instead overcomplicate this paper in light of its objective to provide a managerial
analytical tool. Furthermore, problems in measuring absorptive capacity have been
identified by Rajesh S. Upadhyayula & Rajiv Kumar, who write “despite the existence of
multiple measures of absorptive capacity, none of them captures the construct completely,
or is general enough to be applied (with minor adaptation) to many firms.45” For this
reason in our research we do not attempt to measure absorptive capacity, but instead
focus on measuring the identified determinants of absorptive capacity to provide
reasonable recommendations to the firm in terms of the HRM practices they can adopt to
improve absorptive capacity.
Trust
The term trust is mentioned extensively in connection with social capital and absorptive
capacity, as being a determinant of both concepts, of social relationships, and effective
communication (see Angelos Alexopoulos and Kathy Monks (2004), Rajesh S.
Upadhyayula & Rajiv Kumar (2004), Minbaeva et al (2001), etc.). However, we have not
looked extensively at the concept of trust as a determinant for a few reasons. First, trust is
a very difficult term to quantify and analyze when applying our theory to the firm,
especially in consideration of time and scope. Additionally, we find that trust fits
intrinsically into the definition of Integration, which we find to be a more workable
concept when dealing with HRM practices. For this reason we use integration as a
determinant of social capital as links between integration and this concept has also been
44 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 45 IBID
21
Sources of Corporate Culture Competitiveness: The Danfoss Universe
made, and integration lends itself our framework in a more positive way. Furthermore, as
we understand trust as being intrinsic in integration, we have not ignored this term, but
have delimitated it from our focus.
Theory
Methodology
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Introduction
Executive Summary
Human Resource Management
Although we take a strategic point of view when talking about HRM, we do not complete
a full analysis of how to fit HRM strategy to the overall strategy of Danfoss. This project
does not intend to create a comprehensive strategy for Danfoss, but rather provide a basis
for Danfoss to craft a strategy for HRM in Japan in light of other considerations specific
to their firm. Additionally, specifications of time and scope do not allow for such a broad
analysis.
Organizational Structure
Although the organizational structure of the organization in which communication,
knowledge transfer, etc. occur is an important factor for success, we do not include a
theoretical discussion of this aspect due to specifications of time and scope. Additionally,
suggestions to the change of organizational structure may be unreasonable, especially in
the short term.
3.4 Theoretical Tools and Critique
Intercultural Communications
This project uses Intercultural Communications theory in a few manners. Intercultural
communications is viewed as intrinsic to the process of organizational culture, as well as
a strong component of knowledge sharing. We refer to Intercultural Communication
theory to demonstrate how poor intercultural communications can be detrimental to
knowledge sharing and a strong organizational culture, and thus negatively affect
operations of the firm. In knowledge management theory the link between intercultural
communications and knowledge sharing has not been a focus of study, but has rather
Conclusion
22
Sources of Corporate Culture Competitiveness: The Danfoss Universe
been taken for granted or treated peripherally46. However according to Sully Taylor and
Joyce S. Osland “when examining organizational learning in MNCs, it is clear that strong
intercultural component must be included in order to study and understand how
organizations can be successful”47. We therefore rely heavily on the conceptual piece
presented by Taylor and Osland based on their review of organizational learning and
intercultural communications literature which presents categories of potential
intercultural communications inhibitors. As their work is pioneering48 we rely on the
categories they have selected, but recognize that future empirical research is necessary to
fully validate these categories.
Organizational Culture
Our project uses organizational culture theory in two contexts. First, we see
organizational culture as a foundation for knowledge sharing, and from this point of view
look into ‘negotiated culture’ and the process by which the MNC can maintain a strong
culture which facilitates knowledge sharing. We rely on a recent study made by Andrea
Straub-Bauer who states that existing research on the relationship between knowledge
sharing and organizational culture is rather limited. “It is purely conceptual or based on
small scale qualitative case studies, relying on a few interviews.”49She was able to
empirically study and prove the connection between organizational culture and
knowledge sharing through statistical testing based on a global survey on knowledge
sharing. Additionally, as we extensively refer to Schein’s definition of organizational
culture it should be noted that his approach takes a functionalist point of view in that he
views culture as something that an organization has. On the other hand the symbolic-
interpretive and the post-modern perspectives treat culture as something an organization
is. As these views take a social constructionist point of view in saying that culture is the
build up of shared interpretive schemes, managers have no ability to control the cultural
environment, but can only manipulate situations due to their strategic role50. Both of
46The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 215 47IBID 48 IBID 49 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005. 50 IBID
23
Sources of Corporate Culture Competitiveness: The Danfoss Universe
these concepts are valid, and give an opposing view to Schein’s treatment of
organizational culture. However, as our project aims to understand the role HRM can
play in organizational culture, we take a functionalist point of view, and Schein’s
definition of organizational culture.
Furthermore, in our discussion of negotiated culture focuses on the model presented by
Brannen & Salk who created their conceptual model to analyze the negotiating process of
culture in a Japanese and German joint venture. It is very difficult to set a model for the
acculturation or the way of negotiating a new working culture without having to make
several assumptions. Brannen & Salk have been able to create a model which gives a
good analytical framework of the way that a Japanese and German company negotiated
their new working culture. However the authors didn’t take in consideration many
variables such as the conditions in which the international joint venture was carried out
and they disregarded the context in which different cultural encounters can happen. On
the other hand, as is not possible to put culture into a box or into numbers this model
among others can give a great help for understanding and improving cross cultural
encounters in which a new ongoing negotiated culture must emerge. Each cross cultural
encounter in which a new working culture will be negotiated will have different variables
and therefore one cannot generalize with one model. Furthermore in 1988, a model
focusing on the process of adaptation and acculturation in mergers and acquisitions was
presented by Nahavandi & Malekzadeh51. However this model only covers the context of
mergers and acquisitions. Based on the models proposed by Brannen & Salk and
Nahavandi & Malekzadeh, Alvarado, Hempel, & Zimberi (2004) proposed an adapted
version based on a case study of IKEA’s methods of acculturation and cultural
negotiation. The adapted model was based on extensive research and a presentation by
Kasper Leschly who currently works in IKEA’s expansion group in China. The adapted
model is used in this project to best describe how an MNC can maintain their core values
while negotiating a new working culture in a surface level. However this model is purely
conceptual based on extensive theoretical review and a few interviews.
51 Acculturation in Mergers and Acquisitions. By: Nahavandi, Afsaneh; Malekzadeh, Ali R.. Academy of Management Review, Jan88, Vol. 13 Issue 1, p79, 12p, 1 chart, 3 diagrams; (AN 4306790)
24
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Culture
Cultural dimensions are presented for Danfoss who can then analyze the main values of
the new culture to adapt them into their preferred working culture, and additionally adapt
their own HRM practices to best fit the new culture, which we recommend. Additionally,
we use these dimensions to provide insights into the implementation of HRM practices.
There have been introduced a number of ways for classifying cultures, some of the most
popular ways of classifying cultures has been the more systematic approaches which
focus on the underlying values that influence the more surface levels of culture. In this
context, Hofstede52 has derived value dimensions from questioning preferred states or
behaviors. An alternative approach, based on the ranking of values rather than asking for
preferred states or behaviors has also been presented by Schwartz’s53value types, which
may provide a more robust approach to classifying value dimensions. Research on
national cultures (Hofstede, 1980, 84, 91, 98)5455 can provide important initial clues about
the values, meanings, and behavioral norms that team members might carry into the
MNC. However, despite all efforts there is no commonly acknowledged ‘correct’ concept
of culture or cultural dimensions as yet. There is also a considerable debate about the
validity of the data from which these concepts were derived. For example, Holden
(2002)56 criticizes the relative reliance on Hofstede’s dimensions in the business field. In
his view, the data is necessarily outdated, as it was collected more than thirty years ago.
On the other hand, other research suggests remarkable stability in values. Since there is
no commonly acknowledged ‘correct’ concept of culture or cultural dimensions, these
studies provide us with initial considerations to then do a more in-depth case specific
study considering. We have also used cultural difference concepts and theories in HRM
presented by Terence Jackson. These have been based on cases and experiences and are
52 The Seven Cultures of Capitalism : Value Systems for Creating Wealth in the United States, Britain, Japan, Germany, France, Sweden, and the Netherlands, Hampden-Turner, C. and F. Trompenaars (1994), London, Piatkus. 53Beyond Individualism/Collectivism Schwartz, S. H. (1994): New Dimensions of Values. Individualism and Collectivism: Theory Application and Methods. U. Kim, H. C. Triandis, C. Kagitçibasi, S. C. Choi and G. Yoon. Newbury Park, CA, Sage. 54 Culture's Consequences, International Differences in Work-Related Values, Hofstede, G. H. (1980), Beverly Hills, Sage Publications 55 Cultures and Organizations: Software of the Mind., Hofstede, G. H. (1991), London ; New York, McGraw-Hill. 56 Article 1, Intercultural Communications Compendium, Lisbeth Clausen, 2003
25
Sources of Corporate Culture Competitiveness: The Danfoss Universe
well documented. Additionally we were surprised to find reference to the cultural values
necessary to include in Working in Japan: An Insider’s guide for Engineers, The Modern
Working Environment in Japan and Big in Asia 25 strategies for business success, and
the Danish ministry of science technology and innovation website. Although unusual and
non theoretical sources, we found valuable information which corresponded to theoretical
cultural dimensions as well as the knowledge gained in the Asian Studies Programme.
We recognize that as these theories deal with human relations it is impossible to perfectly
portray or put into a box the cultural differences apparent, and the possible emerging
situations. We therefore use these theories to provide an initial overview of the cultural
considerations that need to be taken.
Knowledge
The concepts and theories from knowledge management constitute a relatively new
school of though, which has presented us with challenges as well as opportunities in
exploring a new area of research. We found that many of the concepts have not been
consistently defined or used and that there are still significant areas which have not been
researched in-depth or empirically tested. We based our conceptualization of the
knowledge process mainly in the works of Dana Minbaeva et al, Rajesh S. Upadhyayula
& Rajiv Kumar, and Angelos Alexopoulos and Kathy Monks. Minbaeva (2005)
establishes that motivation and ability are key determinants of absorptive capacity and in
turn knowledge transfer. She also establishes the importance of Integration “The higher
degree of knowledge transfer is expected when closer relationships…Ghoshal and
Bartlett (1988) find that …integration and communication…appeared to be positive to
creation, adoption and diffusion of knowledge by MNC’s subsidiaries”57. Additionally
she establishes that HRM practices can positively influence these factors. Her study is
based on data collected and tested from 92 subsidiaries of Danish MNCs located in 11
countries. Her study contributes to establishing the relationship between HRM practices
and knowledge transfer in the MNC. However the extent to which this can be generalized
to other globally operating companies could be argued. Additional research is needed to
57 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005, p.9
26
Sources of Corporate Culture Competitiveness: The Danfoss Universe
develop this link further, which until now has been largely black boxed”58. Following
Minbaeva, Angelos Alexopoulos and Kathy Monks (2004) presented the links between
social capital and ability, motivation, and opportunity. They provide a preliminary
conceptual model which should be strengthened and refined by empirical examination.
Finally Rajesh S. Upadhyayula & Rajiv Kumar (2004) present a theoretical examination
of the link between absorptive capacity and social capital. Although well founded, their
conclusions are in need of empirical testing and more in depth theorization of the
concepts of study that can interrelate each of the individual dimensions of absorptive
capacity and social capital59. However this link is not central to this paper. Additionally
they lead us to Zahra and George (2002) who note the importance of Integration to
absorptive capacity “social integration contributes to knowledge assimilation, occurring
either informally or formally”60 . Zahra and George present a comprehensive outline of
the different perspective and usages to date of absorptive capacity. Their paper is highly
theoretical, yet based on the studies of numerous other scholars. Similarly Rajesh S.
Upadhyayula & Rajiv Kumar lead us to the work of Adler and Kwon (2002) who
presented a paper similar to Zahra and George (2002) in that they highlight the usages
and conceptualizations of social capital by numerous theorists in an attempt to clarify the
concept, stating that A-M-O are determinants of social capital. We therefore use these
papers as references to the uses and conceptualization of absorptive capacity and social
capital. From these papers we were able to define the determinants A-M-O-I for our
conceptual model. We use A-M for absorptive capacity as these determinants were tested
statistically and proven valid by Minbaeva and Additionally, A-M-O have been
conclusively decided as determinants of social capital by Angelos Alexopoulos and
Kathy Monks (2004) and Adler and Kwon (2002). Finally Zahra and George and
Minbaeva point to the importance of integration for knowledge transfer.
58Interview with Dana Minbaeva, May 23, 2005 59 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 60 Absorptive Capacity: A Review, Reconceptualization, and Extension, Shaker A. Zahra and Gerard George, Academy of Management Review, 2002, Vol.27, No.2, 185-203
27
Sources of Corporate Culture Competitiveness: The Danfoss Universe
HRM theory
We have placed ourselves in the strategic and normative schools of HRM theory. The
strategic school of HRM theory is “primarily concerned with the relationship between a
range of possible external contingencies and HRM policy and practices”61. This group
views HRM as part of an overall strategy and suggests that “when the various sub
systems including HRM are aligned and supporting each other, superior performance is
likely”62. Although we do not attempt to analyze and fit our HRM recommendations to
the various strategies of Danfoss, we view HRM practices as part of a strategy to improve
communications, knowledge transfer, and thus competitiveness. From this perspective we
follow more closely the normative school by establishing a set of linkages that lead to
performance. The strategic school is criticized for not “providing insight into how HRM
policy and practice translate into high performance”63. Additionally, the normative school
has been criticized for “focusing predominantly on the internal characteristics of HRM at
the expense of broader strategic issues, and in advocating a best set of practices while
ignoring the variety of pressures and consequent business strategies is taking a
considerable risk”64. Finally, emphasis on HRM has been criticized for not yet identifying
when human resources matters more, and how much of the variances in performance can
be explained by the human factor (as opposed to factors outside of HRM)65. We have
attempted to overcome the short comings of the strategic and normative schools by
combining them to provide strategic insight with recommendations made through
concrete linkages. In terms of the third criticism, we have attempted to overcome such a
short coming by identifying practices that have been empirically tested to affect the
determinants of study.
61 HRM and performance: a review and research agenda, David Guest, the International Journal of HRM 8:3, 1997. P.264 62 IBID 63 IBID 64 IBID 65 IBID
28
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Conceptual Model
The resulting conceptual model contributes to an alternative theorizing of human
resource’s role in the management of organizational culture, organizational knowledge,
and an effective intercultural communication. Following Minbaeva (2005), Angelos
Alexopoulos and Kathy Monks (2004), and Rajesh S. Upadhyayula & Rajiv Kumar
(2004), Adler and Kwon (2002), Zahra and George (2002), Schein (1992), and Taylor
and Osland (2003) specifically the model considers social capital and absorptive capacity,
organizational culture, and intercultural communications while stressing the need for
examining empirically the overlooked impact of human resource practices on the
potential corporate culture competitiveness of the firm. The importance of this model to
our case is that it serves as a framework to be able to analyze the phenomenon of the
subsidiary of study from an interdisciplinary approach. In doing this we take a
functionalist approach which could be criticized by post-modernist or social
constructionist schools. The weakness of the model is in that it lacks statistical
examination and it is based on other studies which have also been criticized. Finally it
could be said that the theories combined in this model may make the phenomenon seem
more complex than the situation requires.
In combining the above fields to construct a clear and meaningful analysis we were
presented with the problem of defining and delimitating concepts. We have relied on the
definitions and conceptualizations of various theories, and attempted to make the links
between these fields clear. We have attempted to create a truly interdisciplinary construct
based faithfully in the thoughts of others in an aim to provide the most practical
recommendations possible in the time and scope of the third year project.
TOWS Matrix
A TOWS Matrix is used to “operationalize66” our model. TOWS is a tool often used in
alternative to a SWOT analysis. There are four possibilities here: strength opportunities,
strength threats, weaknesses-opportunities, and weaknesses and threats. The matching of
66 How to operationalize Porter's diamond of international competitiveness, Alan M Rugman; Alain Verbeke, Ontario Centre for International Business, 1992, p.50
29
Sources of Corporate Culture Competitiveness: The Danfoss Universe
strengths and weaknesses with opportunities and threats results in four different sets of
strategic situations This Works to foster the generation of strategic alternatives. It creates
an ideal situation for brainstorming to identify alternative strategies. The four sets are as
follows: SO strategies are developed by thinking of ways that a firm can use its strengths
to take advantage of opportunities in its environment; WO strategies are those that take
advantage of opportunities by overcoming weaknesses; ST strategies use the firm’s
strengths to overcome and avoid threats; WT strategies are those that attempt to minimize
weaknesses and avoid threats. We use the TOWS to highlight and identify areas of
analysis. This analysis tool may be criticized as it only considers certain aspects (T-O-W-
S), however for the purpose of our analysis it proved suitable.
Methodology
Theory
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Introduction
Executive Summary
3.5 Data Collection, Resources, and Critique
The process of data collection consisted of four steps:
1- Team member period of Observation and analysis of report by the entire group
2- Secondary data collection of related literature
3- Conduction of interviews with individuals related to the context
4- Formulation of questionnaires
In response to exploratory research strategy, the choice of the data collection method was
focused on conducting qualitative analysis. The largest share of data collected is primary,
which is from the non-standardized or in depth and semi-structured interviews67. The
other part of qualitative data that is rated secondary is sourced from the company such as
organizational charts, information on personnel, details revealing history and other
related data to the company profile. This data was collected through an exchange of
correspondence via e-mails. We additionally formulated quantitative data through the
distribution of a questionnaire to all employees of the Japanese subsidiary.
Conclusion 67 M. Saunders, P. Lewis, and A. Thornhill, (2000), Research Methods for Business Students, second edition, Prentice Hall Press, p. 243
30
Sources of Corporate Culture Competitiveness: The Danfoss Universe
3.5.1 Secondary data collection of related literature
In response to the various issues, we considered numerous disciplines when creating our
theoretical and analytical frameworks. After having reviewed Intercultural
Communications and Organization literature related to the subject, we turned to focus on
topics of HRM strategy and knowledge management. Through this extensive secondary
data collection we found the main sources of our frameworks, which is based on several
main books and a number of more recent articles.
The search for context related literature is mainly focused on collecting secondary data
that is focused on the environment of study. In addition to theoretical papers, we
collected secondary information from Danfoss in the form of organizational charts, the
employee perception survey results, the company handbook, etc.
Secondary literature sources include both quantitative and qualitative data and can be
employed in descriptive research68. The quantitative research method is regarded by some
to be more objective and accurate than the qualitative research method. The quantitative
research method follows certified instructions while in it is claimed that in the qualitative
research method the researcher biases analysis and interpretation of the empirical data.
However, through careful consideration and criticism of qualitative data we think this
criticism can be overcome. Conversely, it is argued that it is just as easy to manipulate
with numbers and statistics.69 We will make use of both quantitative and qualitative
secondary data.
Secondary literature sources are subsequent publication of primary literature and due to
the time it takes to publish the data, the information in the secondary literature sources
can be dated. However most of the sources utilized in this project are considerably recent,
and provided valuable information. Additionally, data employed in secondary literature
68 Saunders, M., Lewis, P., Thornhill, A., 2000, Research Methods for Business Students, (second edition), Great Britain, Pearson Education Limited. 69 Andersen, Ib, 1997, Den skindbarlige virkelighed – Om valg om samfundsvidenskabelige metode, Samfundslitteratur, p.22
31
Sources of Corporate Culture Competitiveness: The Danfoss Universe
sources are collected for a purpose which may differ from the research issue. We took
these criticisms into consideration when using the information provided by these sources.
3.5.2 Conduction of interviews with individuals related to the context
We conducted 4 interviews in total including:
- Interview with the International HRM Department, Danfoss Headquarters
- Interview with Danfoss Asia President
- Interview with Danfoss Japan President
3.5.3 Formulation of questionnaires
The questionnaires were formulated based on a review of strategies and literature. We
established beforehand the categories which corresponded to our research, primarily A-
M-O-I, shared culture, and intercultural communications, and constructed the
questionnaires with a variety of questions for each category which attempted to be
somewhat indirect to increase the chances of revealing underlying assumptions. For
instance we did not ask employees directly if they felt motivated, but rather questions like
“I am satisfied with my effort” or “I enjoy my daily work” ranked on a scale from 1 to 7
(please see appendix for full questionnaire). There are some instances where there were
additional questions that would have been beneficial to ask, but were not included.
However, the questions provided sufficient data for each area of study. The questionnaire
was anonymous and was administered via an internet web service70; so that employees
could fill it out online. We were supported by the President’s assistant and an HR
representative in translating and encouraging employees to fill it out. The response rate
was 67% (sent to 62 people, 42 responded). The questionnaire results corresponded well
with other data by providing numeric support to the qualitative results. We accepted the
data as valid.
70 defog.net provided free access to their survey software.
32
Sources of Corporate Culture Competitiveness: The Danfoss Universe
4. Theory
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Theory
Methodology
Introduction
Executive Summary
We will begin the Theory section by introducing the different fields of study that we have
categorized as the “what” is needed to be considered to optimize processes. Beginning
with field of organizational culture we will explain our understanding of culture, its
negotiation process and the need of importing the core values into the different
subsidiaries. We will continue by introducing the Intercultural Communication section in
which we will present our understanding of this process and its link to the Knowledge
Management field. We finish the “what” section with Knowledge Management, in which
we will illustrate a process which we argue, will enhance the Knowledge transfer within a
firm.
Figure 3
Conclusion
33
Sources of Corporate Culture Competitiveness: The Danfoss Universe
4.1 Organizational Culture
Theory
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive SummaryTaking a functionalist point of departure, we make reference to Schein’s definition of
organizational culture. Schein attempts to provide a definition of organizational culture in
terms of a dynamic model of how culture is learned, passed on, and changed. According
to Schein a “strong” organizational culture is identified by a high degree of homogeneity
and stability of group membership and length and intensity of shared experiences of the
group71. Although, once an organization has developed a strong culture, as long as the
leadership remains stable it can withstand a high turnover of employees as they will
quickly be assimilated into the culture. Schein argues that the culture of the firm can be a
management tool, and thus we infer that it can also be influenced through HRM practices.
We view organizational culture to be central to all processes of the firm, as it influences
the behavior of individuals and the practices within the firm72. According to Straub-Bauer
this means that “on one hand organizational culture influences what organizational
members think about knowledge sharing and how they subconsciously behave in relation
to it, and on the other, through certain organizational practices, it influences directly
knowledge sharing behavior 73 ”. The connection between organizational culture and
knowledge sharing is highlighted in the following models.
71 Edgar H. Schein , Coming to a new awareness of Organizational Culture, in Sloan Magazine Review, winter, p.7, Organization Compendium Asian Studies Programme, 2003 72 IBID
Conclusion 73 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005, p.33
34
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Organizational culture plays a duel role with regards to knowledge sharing leading to a virtuous cycle in which organizational culture, individual behavior and practices reinforce each other.
Individual Behavior Absorptive Capacity
Organizational culture
Knowledge sharing
Organizational practices/structure Technology
Compensation and reward Expatriation
Training & development
Figure 474
Knowledge sharing at cognitive level
Knowledge sharing at behavioral level
Basic assumptions
Artifacts
Values operate both on the behavioral level and on the cognitive level, as they are the means through which the basic assumptions of an organization’s culture are reinforces, rejected or changed. Thus, values are regarded key in creating or sustaining a knowledge-sharing culture.
Values
Figure 575
74 IBID 75 Knowledge Sharing and Organizational Culture in Multinational Corporations, Andrea Straub-Bauer, Department of Organization and Industrial Sociology, Copenhagen Business School, 2005.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Starbuck (1992) suggested that the ability to acquire information is proportional to the
norms for exchange of information76, and we therefore argue that the norms and values
which support the exchange of information should be sustained in all areas of the firm. In
order for the knowledge transfer process to occur, and for the corporate culture
competitiveness to be developed and maintained, there needs to be elements of
consistency throughout all areas of the MNC. As culture is developed there are aspects
which are valuable and those which are not, it is the responsibility of headquarters to
select and maintain those values and processes which contribute to the firm through
knowledge transfer, flexibility, a strong set of common norms and values. For instance, it
is noted that the occurrence of a shared vision can facilitate knowledge sharing and
integration among individuals or groups by providing a purposeful meaning to their
actions: ‘A shared vision embodies the collective goals and aspirations of the members of
an organization … [O]organization members who share a vision will be more likely to
become partners sharing or exchanging their resources’ (Tsai & Ghoshal, 1998: 467).77
We therefore make reference to cultural negotiation theory, and the adapted models of
Brannen & Salk and Nahavandi & Malekzadeh 78 to present how the organization should
go about the cultural negotiation process.
Brannen & Salk 2000 introduced a model of cultural negotiation linking organizational
events with issue domains as points of departure for negotiations. In the study they argue
that “We can understand the process of cultural negotiation and as a result be better
prepared to monitor and manage culturally diverse settings.”
The model of Brannen & Salk is based on five assumptions. The first assumption in the
model by Brannen & Salk is that “The national cultural origins of IJV (International Joint
Venture) team members serve as initial anchors or points of departure for team members
76 c.f. Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004 77 c.f. Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 78 Alvarado, Hempel, & Zimberi 2004, Intercultural Communications and Organization, A case of IKEA
36
Sources of Corporate Culture Competitiveness: The Danfoss Universe
as sources of values, meanings and norms brought to the bicultural organizational
context.” The second of Brannen & Salk’s model is “The structure of the IJV, the
characteristics of its members and the relations of power and interdependence among
them, and the specific issues and threats confronted by the team will shape which of the
many cultural traits become salient in the social negotiation of the IJV working culture”.
Assumption 3 of Brannen & Salk’s model in our opinion can fit into almost any cross
cultural encounter: “When members from two distinct national and organizational
cultures come together a “negotiated culture” emerges. Assumption 4 of their model says
that “the specific attributes of an IJV working culture will be emergent and cannot be
determined a priori.” Finally, assumption 5: “The cultural stances of organizational actors
may map into “issue domains” in unexpected ways.
However, based on a study of IKEA by Alvarado, Hempel, & Zimberi, 2004, the model
was adapted to better fit the case of the MNC and its subsidiaries in light of the
organization’s strategic goals. The key differences in the second model is that
Headquarters go through the negotiation process from a higher vantage point than the
subsidiary and throughout the process maintain core values which are non-negotiable and
which are present in the final negotiated culture. Thus, although the resulting negotiated
culture cannot be fully determined beforehand, certain values can be selected as non-
negotiable. In the case study by Alvarado, Hempel, & Zimberi, 2004, it was found that
this was aided by two processes shown in the models of Core Values and the Cultural
Surface and of Cultural Focus 79(see figures 6 & 7) below. We argue that these models
present an effective strategy for maintaining the core values of the MNC while allowing
space for flexibility and adaptation to the culture of the subsidiary, also necessary for
achieving success. One strategy used to keep core values is to study the values of the new
culture beforehand and assimilating some of those values into a surface level while
leaving the core values of the corporate culture untouched. Figure 6 depicts the values
which cannot be altered, and the space available for change. In order to gain as much as
possible from foreign ventures MNCs must realize that the competitive advantage of a
transnational organization “lies to a great extent in its ability to identify and transfer best
79 Intercultural Communications and Organization, the IKEA case, Alvarado, Hempel, & Zimberi, 2004
37
Sources of Corporate Culture Competitiveness: The Danfoss Universe
practices, particularly core competencies and knowledge, between its geographically
dispersed and diverse units (Bartlett & Ghoshal, 1999)”80. Additionally, the importance
of flexibility to adopt to new environments is highlighted by Lyles and Salk (1996, pp.
881-2) who postulate that flexibility promotes knowledge transfer process: “by
encouraging greater receptivity of organizational members to new stimuli from the
outside, by promoting collaboration and exchanges of information within the
organization and by granting members greater latitude in altering activity patterns and
ways of doing things to adopt to perceived changing needs an conditions”81. This should
be supported by HRM practices which maintain focus on strong culture (core values)
Figure 7.
Theory
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive Summary
Figure 682 Figure 783
4.2 Intercultural Communications
There are very few studies that deal with the link between intercultural communication
and organizational learning84. However, we argue that the Intercultural Communication
process is essential to successful knowledge transfer. For instance, at the base of all
theories concerning organizational learning lies the assumption that communication must
80 c.f. Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, Paul Miesing, Mark Kriger, and Neil Slough, for the Journal of Technology Transfer, 2003 81 c.f. HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 82 Kasper Leschly, Intercultural Challenges for IKEA in China, Asian Studies Program: Intercultural Communications, 12th December 2003 83 Kasper Leschly, Intercultural Challenges for IKEA in China, Asian Studies Program: Intercultural Communications, 12th December 2003
Conclusion 84The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 213
38
Sources of Corporate Culture Competitiveness: The Danfoss Universe
occur in order for knowledge to be created or transferred.85 Additionally, according to
Taylor and Osland “poor intercultural communications is one of the key barriers to global
organizational learning”.86 It is well recognized that communication between members of
different cultures is often filled with “misunderstandings and second guesses because of
language problems, communication style differences and value orientation differences”
(Ting-Toomey, 1999:18).87 These problems are especially visible in the MNC due to the
need to share knowledge across individuals and groups located in highly divergent
cultural environments. In the following section we illustrate how and why Intercultural
Communications affects organizational learning, and highlight some of the key barriers to
effective Intercultural Communications.
According to Huber “information distribution is a determinant of both the occurrence and
breadth of organizational learning”88. Information is distributed by individuals, who are
usually seen as the basis of learning within organizations (Nonaka and Takeuchi, 1995)89.
According to Taylor and Osland, individuals hold internal images of how the world
works, called “mental models” or “schemata”90. These mental models decide what new
information is acquired, retained, used and deleted. Additionally, “they not only help us
make sense of the world we see, they can also restrict our understanding to that which
makes sense within the mental model”91. The perception model illustrates this process,
and suggests that when an actor receives a message that he/she has no corresponding
mental model for the actor will then choose to either ignore the message, assume it is a
variant of something familiar that is already in another mental category and assign
meaning (which may be incorrect in category and meaning), choose to perceive the
signals as unfamiliar and reject them or keep them waiting until they can be related to
something already familiar, or the actor may choose to alter his/her mental categories to
accommodate the new information and assign a new meaning.92 Thus, in each moment of
85 IBID 86 IBID 87c.f. IBID p. 216 88 c.f. The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 217 89 c.f. IBID 90 IBID 91 c.f. IBID 92 Intercultural Communication in the Global Workplace, Linda Beamer and Iris Varner, McGraw Hill Irwin, 2001
39
Sources of Corporate Culture Competitiveness: The Danfoss Universe
intercultural communication within the MNC these decisions are taking place, and the
resulting understanding or misunderstanding is directly affecting the knowledge being
transferred and shared. Additionally, as learning takes place through interaction with the
environment, an individual’s mental models change, and these changes affect the
organization’s mental model.93As each individual holds mental models, so does the
organization hold a shared mental model. “The cycles of individual learning affect
learning at the organizational level through their influence on the organization’s shared
mental models”(Kim, 1993:43)94 . Thus the organization as a whole is an important
learner and communicator (Inkpen and Crossan, 1995; Kim, 1993)95. The mental models
that the organization collectively holds help it in decision-making through the schemas,
scripts, and casual maps that result from the mental models. The organization
communicates its mental models internally through established standard operating
procedures, organizational culture, assumptions, artifacts and overt behavior rules that
characterize the organization (Kim, 1993)96. Thus, communication becomes a key factor
both in how the organization learns from the individuals within it and how it
communicates its mental models to these same individuals.
We illustrate Intercultural Communication in the organization in the below form. It
should be noted that intercultural communication occurs at all levels of the organization
(individual, group, department, subsidiary, inter-subsidiary, etc.), but for the sake of
simplicity we have placed the communication line between headquarters and subsidiary.
Figure 8
93The Blackwell Handbook of Organizational Learning and Knowledge Management, Sully Taylor and Joyce S. Osland, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, 215 94 c.f. IBID 95 c.f. IBID 96 c.f. IBID
40
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Theory
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive Summary
4.4 Knowledge Management
The link between knowledge and competitive advantage has been debated, having on one
side those who establish a positive link between these constructs (Fiol and Lyles,
1985:803, Barney, 1991)97, and those who do not see a direct relationship between
learning, knowledge, and performance. However, recent empirical efforts have found
support for the direct impact of learning, knowledge, and human and social capital on
performance (e.g., Appleyard, 1996; Bontis et al., 2002 Decarolis and Deeds, 1999; Hitt
et al., 2001; Yeoh and Roth, 1999)98. It is important to note that the conclusion of these
studies is not that “the more learning the better” or “the more knowledge the better”, but
that learning that is effective, and that knowledge that is relevant may have positive
effects on performance.99
It is acknowledged that in today’s world of business, the ability to obtain and transfer
knowledge has become one of the main competitive advantages of MNCs. According to
Bartlett and Ghoshal (1989) “successes of multinational companies very much depend
upon the company’s ability to speedily transfer knowledge throughout the organization. If
important knowledge remains within the individual subsidiary, the opportunities to
maintain competitive advantage in the global market can be diminished; inability of the
firm to transfer knowledge throughout the organization can lead to communication costs
and affect the overall efficiency of the organization”100.
From various research papers we have concluded that absorptive capacity and social
capital are two of the key factors of the level of knowledge transfer. Absorptive Capacity
is the ability of a group of people to absorb and effectively use new information taken
from outside the group. Social Capital is the collective resources of an organization 97 The Blackwell Handbook of Organizational Learning and Knowledge Management, Vera and Crossan, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p.133 98 c.f. IBID 99 c.f. IBID 100 Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, Paul Miesing, Mark Kriger, and Neil Slough, for the Journal of Technology Transfer, 2003 Conclusion
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
embedded in the social networks of the group. We found through literature review that
levels of motivation, opportunities, integration and ability directly affect the levels of
absorptive capacity and social capital.
Absorptive Capacity
Absorptive Capacity is considered as fundamental to knowledge transfer within the
organization101. Accordingly it has been proposed in the knowledge transfer literature that
the absorptive capacity of the receiving unit is the most significant determinant of
internal knowledge transfer in MNCs (Gupta and Govindarajan, 2000)102.
Cohen and Levinthal, 1990 and Kim, 1998 refer to ability and motivation as being
necessary for absorptive capacity, and term these concepts prior knowledge and intensity
of effort103.
‘Prior knowledge base refers to existing individual units of knowledge available
within the organization’ (Kim, 1998 p.271). Thus, employees’ ability, their
educational background and acquired job-related skills represent the ‘prior
related knowledge’ which the organization needs to assimilate and use (Cohen
and Levinthal, 1990). However, in addition to the prior related knowledge, there
should be a certain level of ‘organizational aspiration’… (Cohen and Levinthal
1990). As proposed by Kim (1998) “the intensity of effort refers to the amount of
energy expended by organizational members to solve problems” (p.271)104.
Following the above explanation, Minbaeva et al relates the term ‘intensity of effort’ to
motivation: “even though the organization may consist of individuals with high abilities
to learn, ‘its ability to utilize the absorbed knowledge will be low if employees’
motivation is low or absent (Baldwin, Magjuka, and Loher, 1991: 52)’105.”
101 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, Journal of International Business Studies, (2003) 34, 586-599 102 c.f. IBID 103 c.f.IBID 104 IBID 105 IBID
42
Sources of Corporate Culture Competitiveness: The Danfoss Universe
It is concluded that both aspects of absorptive capacity (ability and motivation) need to be
present in order optimally to facilitate the absorption of knowledge from other parts of
the MNC (Minbaeva et al., 2003).
In reference to other determinants of absorptive capacity according to Minbaeva et al
(2003) “previous research has shown that absorptive capacity will be higher when
extensive intra-organizational communication is in place”.106 Zahra and George (2002)
also categorized social integration mechanisms as an antecedent of absorptive capacity
and note “social integration mechanisms can facilitate the sharing and eventual
exploitation of knowledge..firms that use social integration mechanisms that build such
connections are therefore positioned to make their employees aware of the types of data
that constitutes their potential absorptive capacity” 107 . Thus social networks, or
integration, are necessary for absorptive capacity to flourish.
As is evident in its definition, the role of absorptive capacity is not just to receive new
information, but to utilize this knowledge to achieve greater results:
Clearly, pure transmission of knowledge from the source to the recipient has no
useful value if the recipient does not use the new knowledge. The key element in
knowledge transfer is not the underlying (original) knowledge, but rather the
extent to which the receiver acquires potentially useful knowledge and utilizes this
knowledge in own operations108.
From the above considerations we derive ability, motivation, and integration. In addition
to absorptive capacity we found that social capital is the second fundamental pillar for
knowledge transfer.
106 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 107 Absorptive Capacity: A Review, Reconceptualization, and Extension, Shaker A. Zahra and Gerard George, Academy of Management Review, 2002, Vol.27, No.2, 185-203 108 The MNC Knowledge Transfer, Subsidiary Absorptive Capacity and HRM, Dana Minbaeva, Torben Pedersen, Ingmar Bjorkman, Carl F. Frey, H.J. Park, Journal of International Business Studies, (2003) 34, 586-599, p.2
43
Sources of Corporate Culture Competitiveness: The Danfoss Universe
Social Capital
According to Angelos Alexopoulos and Kathy Monks the more recent interest in social
capital can be attributed to the rise of the network economy and the emergence of KIFs
(Knowledge Intensive Firms), (Lesser, 2000)109. As Cohen & Prusak (2001: 16) suggest,
‘the size and intricacy of organizations, the proliferation of critical information, and the
increasing complexity of [work] tasks make connection and cooperation – social capital –
increasingly important’110.
According to Nahapiet & Ghoshal’s (1998) theoretical model social capital consists of
three mutually reinforced dimensions: structural, relational, and cognitive social capital111.
Angelos Alexopoulos and Kathy Monks use these dimensions to link social capital to
ability, motivation, and opportunity:
Structural social capital refers to the pattern, configuration, and purpose of
social interactions. Therefore, central to the structural dimension of social capital,
is the existence of network ties among actors, the configuration of network ties
(i.e., density, connectivity, hierarchy), and the notion of appropriability – that is
networks capacity in serving as information resources for different than initially
developed purposes (Coleman, 1988). Social network theorists (Burt, 1992;
Granovetter, 1973; Hansen, 1999) show that the structural properties of social
relationships constitute major resources of benefits derived from: … referrals
which provide ‘information on available opportunities to people or actors in the
network, hence influencing the opportunity to combine and exchange knowledge’
(ibid: 252-253).112
109 c.f. Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 110 c.f. IBID 111 c.f. IBID 112 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004
44
Sources of Corporate Culture Competitiveness: The Danfoss Universe
The relational dimension focuses on the content, rather than the structure, of
social relationships. It refers to the kind of relationships individuals or groups of
individuals have developed with each other through a history of social
interactions.
Finally, the cognitive dimension refers to resources that provide shared
representations, interpretations, and systems of meaning among parties. When
interactions embody shared understandings, common language and codes,
employees can enhance their intercommunication abilities, thereby providing
more opportunities to share knowledge effectively (Morris et al., 2002).
According to Tsoukas & Vladimirou (2001) the existence of shared language … is
vital not only for efficient knowledge transfer, but also for knowledge integration
mainly through the establishment of common cognitive schemata and frameworks,
such as metaphors, analogies, and stories, which act as vehicles for integrating
individual understandings and experiences113.
Accordingly Angelos Alexopoulos and Kathy Monks conclude by establishing that social
capital has a reciprocal relationship to employee’s A-M-O: Though constructing shared
language and vision employees are able to share information, cultivating social ties can
motivate employees to share information, and providing the opportunities to share
knowledge through social interaction, social capital aids in the overall process of
knowledge transfer, and through this process social capital itself is strengthened114. “Thus,
social capital can be viewed as both a cause and outcome of employees’ A-M-O to share
their human capital”115.
113 IBID p. 7 114 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 115 IBID
45
Sources of Corporate Culture Competitiveness: The Danfoss Universe
However, although social capital may be a reciprocal facilitator in creating common
cognitive schemata and frameworks, we argue that these can also be created and
reinforced by shared experiences within a single, strong corporate culture. For instance,
‘A shared vision embodies the collective goals and aspirations of the members of an
organization … Organization members who share a vision will be more likely to become
partners sharing or exchanging their resources’ (Tsai & Ghoshal, 1998: 467)116.
Social Capital and Absorptive Capacity
We have already established that absorptive capacity is the ability and motivation to
absorb and use new knowledge, and that this ability and motivation is also influenced by
the opportunity to receive such knowledge in terms of the communication channels
available in the firm. We will now show how social capital aids in providing and
supporting the necessary requirements for absorptive capacity, and how an increase in
absorptive capacity will also positively affect social capital.
According to Angelos Alexopoulos and Kathy Monks social capital aids in the
assimilation or absorption of new information by providing the shared codes and
meanings by which to send and receive new information and provides the inherent social
ties, based on trust and integration, which increase the probability of receiving or sending
the necessary new knowledge to solve problems and thus use and create (exploit) the new
knowledge117. For instance, “it has also been conclusively proven that problems and
solutions simultaneously exist in firms, with problem looking for solutions and solutions
finding problems by chance. In a recent study Rajesh S. Upadhyayula & Rajiv Kumar
suggest that internal social capital increases the probability of such occurrences, i.e.,
problems and solutions finding each other.”118 Furthermore, in a study of information
processing and problem solving, it was found that managers avoided sending problems to
formally designated problem solvers, and instead sent problems to people in their
116 IBID 117 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 118 Social Capital as an Antecedent of Absorptive Capacity of Firms, Rajesh S. Upadhyayula & Rajiv Kumar, DRUID Summer Conference, 2004, p.7
46
Sources of Corporate Culture Competitiveness: The Danfoss Universe
personal ties (Stevenson & Gilly, 1991)119. Thus, “internal social capital (personal ties in
this case) increases the probability of information, solutions and problems meeting each
other” 120 . Additionally, based on our literature review we argue that the increased
integration resulting from social capital positively influences absorptive capacity by
augmenting the networks necessary for seeking new information and thereby increasing
the ability to find the information, which in turn could increase individual’s motivation to
search as there is a higher probability of success.
Finally absorptive capacity, through the new use of knowledge, reinforces social capital
by adding to the sum of resources created by the network and through that also
strengthening the ties within that network through the shared experience of knowledge
creation.
Figure 9
119 c.f. IBID 120IBID p.8
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
4.5 Conceptual Model
This model can be broken down into three processes in order to enhance understanding.
As we view sustainable competitive advantage as the ability of the firm to implement
new strategies that are not easily imitated by others, we see knowledge transfer as
intrinsically linked to this process. Knowledge that is transferred within the MNC
throughout its history and experiences will inevitably lead to unique organizational
knowledge, which can help the MNC to better serve diverse markets using diverse groups
of people. In order for knowledge transfer to occur there needs to be successful
Intercultural Communications. Unless members can interpret and understand the signals
and messages of their colleagues, they will not be able to process and use the knowledge
presented to them, nor will they be able to transfer this knowledge to others. Furthermore,
to sustain a situation where knowledge transfer and intercultural communications are
successful, the organization must have a culture which supports these processes and is in
line with the strategy and goals of the organization. Thus our model comprises
knowledge transfer, intercultural communications, and the transfer of core values from
the headquarters.
Theory
How
How
Analysis
Danfoss
What Why
HRM
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive Summary
Figure 10
Conclusion
48
Sources of Corporate Culture Competitiveness: The Danfoss Universe
As we could not encompass this phenomenon into a single term, we found that the
ultimate effect of these processes driven by HRM practices is an enhancement of the
already established corporate culture. The firm focuses on the exportation of core values
to the subsidiary while allowing flexibility for obtaining the idiosyncratic and inimitable
assets121 created in the new context, in this case Japan. This and the local knowledge are
reversely transferred to the headquarters and subsequently other subsidiaries. Since the
sources of these processes are driven by the mission/strategy established by the firm and
affect directly the surface of the corporate culture adding from the intangible assets
created in the subsidiary of focus, we have decided to name this model “Sources of
corporate culture competitiveness.” This concept relies on the resource based view
assumption that firms within an industry (or group) may be heterogeneous with respect to
the strategic resources they control and that these resources may not be perfectly mobile
across firms, and thus heterogeneity can be long lasting.122 As this process will enrich the
corporate culture further adding tacit and explicit knowledge from a different context and
increasing the adaptability of the firm and understanding of new knowledge in areas
before unexplored we argue that this phenomenon affects positively the “culture
competitiveness” of a firm. We further argue that a firm should focus on maintaining its
core values while allowing flexibility to enhance its corporate culture through the
application of a set of HRM practices appropriate for the context which will facilitate
intercultural communication while improving the opportunities, motivation, ability and
integration of the employees and thus facilitating the creation of a compatible network of
employees and the transfer of knowledge.
121 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management 1991, Vol.17, No.1, 99-120, copyright 2001 122 IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Of course, not all of the knowledge/practices/etc. created through this process will lead to
competitive advantage and we thus recognize that it is management’s ability to recognize
and promote the most competitive aspects in terms of the environment that will determine
how much competitive advantage the firm will be able to extract from this process.
According to Barney “to have the potential for sustained competitive advantage, a firm
resource must be valuable in the sense that it exploits opportunities and/or neutralizes
threats in a firm’s environment, it must be rare among a firm’s current and potential
competition, it must be imperfectly imitable, and there cannot be strategically equivalent
substitutes for the resource that are valuable but neither rare or imperfectly imitable”.123 It
is stated that performance advantages based on knowledge that is tacit, complex and
specific might be harder to replicate because the causes of superior performance are more
ambiguous to outside observers than to members of the focal firm (Reed and DeFillippi,
1990; Barney, 1991).124 Thus we argue that the intangible assets created through our
model of sources of cultural competitiveness intrinsically fulfill the requirement of being
difficult to imitate as they are based on complex social networks and processes within the
firm. However, it is up to management to decide which assets best fit adaptation to the
external environment.
We argue that the advantage of our model is that it establishes a link between the
individual knowledge activities and the business performance, where business
performance is defined as a multi-dimensional construct capturing not only the efficiency
gains but also production and product developments. The model shows that there is a
strong link between the micro processes of setting up incentive structures and applying
knowledge management tools through managerial action on the level of the unit and the
business performance. The link goes through the development of absorptive capacity and
social capital and thus the stimulation of knowledge inflow from other units.125 We argue
123 Firm Resources and Sustained Competitive Advantage, Jay Barney, Texas A&M University, Journal of Management 1991, Vol.17, No.1, 99-120, copyright 2001 124 c.f. The Blackwell Handbook of Organizational Learning and Knowledge Management, Chakravarthy et al, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p. 313 125 Volker Mahnke, Torben Pedersen and Markus Verzin, The impact of knowledge management on MNC subsidiary performance: the role of absorptive capacity, Department of Management, Politics and Philosophy, Copenhagen Business School, CKG WP 10/2003, CKG Working Paper No. 12/2003, ISBN: 87-91506-10-7, 2003
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
that this combined with effective Intercultural Communications and a focus on
maintaining core values is the source of corporate culture competitiveness.
Theory
What Why
How
Analysis
Danfoss
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive Summary
4.6 Human Resource Management Practices
In HRM literature there lists a plethora of strategies and focus points for increasing
productivity. We outline the key findings below, linked to the competencies we argue are
essential to knowledge transfer, namely A-M-O-I and Intercultural Communications.
It is expected that staffing126, training127, appraisal systems128, incentives129, job security
and collaborative work130, corporate socialization mechanisms131, and career management
and development132 when applied as a system of mutually reinforcing practices, help
MNCs to achieve higher outcomes, in terms of the degree of knowledge transfer. We will
elaborate briefly on each of these practices in the next section. At the end of the section
we discuss the concepts of training for expatriates and local staffs in terms of training for
cross cultural encounters for the purpose of providing a necessary insight to Danfoss.
Staffing
Staffing policies affect the ability of employees as well as their motivation. Staffing
includes job analysis, recruitment, and selection procedures. HRM practices should aim
at acquiring, developing, and retaining human capital.133 Staffing procedures should aim
to bring into vacant positions people with the identified skills and knowledge. HRM
practices can also introduce ‘cultural fit’ criteria in the recruitment and selection
processes that can ensure that prospective employees are capable of demonstrating a
knowledge sharing potential willingness, cross-functional team working skills, and
126 see Minbaeva, 2005 and Angelos Alexopoulos and Kathy Monks, 2004 127 IBID 128 IBID 129 IBID 130 see Angelos Alexopoulos and Kathy Monks, 2004 131 IBID 132 see Minbaeva, 2005 and Angelos Alexopoulos and Kathy Monks, 2004
Conclusion 133 Paul Miesing, Mark Kriger, and Neil Slough, Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, for the Journal of Technology Transfer, 2003
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
collaborative spirit (Robertson & O’Malley Hammmersley, 2000; Swart & Kinnie,
2003).134
Training
“There is extensive evidence that investment in employees’ training
enhances…organizational performance (Delaney and Huselid, 1996; Koch and McGrath,
1996)”. 135 Additionally, similar training experiences can contribute to building
connections across diverse groups in anticipation of the future formation of cross-
functional teams.136 Training can be a facilitator of not only integration, but also abilities,
and intercultural communication.
Appraisal systems
Appraisal systems can provide employees with feedback on their performance and
competencies, and give directions for enhancing their competencies to meet the needs of
the organization.137 If executed properly, performance appraisals can lead to employee
development, motivation, and ability. This strategy appraises individual and team
performance so that there is a link between individual innovativeness and company
profitability.
Incentives
HRM practices may influence individual performance by providing incentives that elicit
appropriate behaviors. Such incentive systems may include reward systems which
include performance-based compensation, the use of internal promotion systems 138 ,
freedom to do research, freedom to fail, freedom to form teams, freedom to run
134 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 135 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 136 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 137 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 138 (Huselid, 1995)
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
businesses, balancing pay and pride, dual career tracks, recognition rewards, and
balancing team and individual rewards. This strategy uses rewards to motivate personnel
to achieve an organization’s goals of productivity, innovation and profitability. However,
one must be careful when using incentive systems to create motivation among employees,
as this type of motivation lends its self more to extrinsic motivation than intrinsic
motivation. It is essential to motivate employees intrinsically, for instance through
individual development schemes in order to facilitate knowledge transfer, especially tacit
knowledge.
Career management and development
Career management includes empowering people, leading by example, and continued
education. This strategy matches employees’ long-term career goals with organizational
goals through continuing education and training. 139 In career development where
mentoring plays an important role is important as strong connections to a mentor can lead
to increased access to the organizational network resulting in career advancement.140
Job Security and collaborative work
In addition, it is suggested that high levels of employee commitment can be associated
with knowledge sharing proclivity (Hislop, 2003)141. Additionally, “Leana & van Buren
III (1999) suggest that a long term orientation to employment relationships, including the
provision of job security and the promotion of collaborative work, can build relational
contracts between employees and employer and also among employees, thereby
increasing the level of integration”142.
139 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 140 Angelos Alexopoulos and Kathy Monks, A Social Capital Perspective on the Role of Human Resources Practices in Intra-organizational Knowledge Sharing, Centre for Research in Management Learning and Development Dublin City University Business School, submitted to the 5th International Conference on HRD Research and Practice across Europe, 2004 141 c.f. IBID 142 IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Corporate socialization mechanisms
Corporate socialization mechanisms such as informal socialization, group activities and
projects, company outings, and the creation of shared visions and goals can aid in
integrating employees by providing them the opportunity to communicate and form
social relationships.
Finally, research has also indicated that HRM practices have the most complementary
effect on the degree of knowledge transfer when they are applied as a system.143 In fact,
this point is somewhat self evident, as HRM practices as part of a well thought out
strategy will most likely have a greater effect than HRM practices which are used
arbitrarily. For instance, “while the adoption of individual HRM practices may be
expected to influence innovation performance positively, the adoption of a package of
complementary HRM practices could be expected to affect innovation performance much
more strongly” 144(Laursen and Foss, 2003, p. 257)145. Finally it is recommended that HR
policies maintain a flexible world view throughout the process of creating and
implementing strategies. “They should recruit and place, train and retain, and rotate the
best minds available for the task, wherever they might come from, and be open to flexible
implementation of policies in diverse cultures”146.
The HRM practices should fit the organizational context.147 As, Etzioni (1975) identified
four levels of employee commitment and involvement in the organization, including
moral involvement, calculative involvement, compliant involvement, and alienative
involvement148. We argue that employees working in an environment which does not
correspond to their cultural values and needs will result in alienative involvement, which
is considered a negative set of attitudes that reject the organizational values, where effort
is minimal.
143 HRM practices and MNC knowledge transfer, Dana B. Minbaeva, Department of International Economics and Management, Copenhagen Business School, Emerald group publishing limited, vol. 34, no.1, 2005 144 IBID 145 c.f. IBID 146 Paul Miesing, Mark Kriger, and Neil Slough, Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, for the Journal of Technology Transfer, 2003 147 International Human Resource Management, A Cross Cultural Approach, Terence Jackson, Sage Publications, 2002 p.123 148IBID p. 108
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
4.6.1 Intercultural Training
In addition to the training considerations mentioned in connection with knowledge
processes. It is important to aid these processes by training in intercultural capabilities as
it has been pointed out that intercultural communications affects some of the key
determinants of our conceptual model.
It is recommended that both local employees and expatriate employees receive cross
cultural and intercultural communications training149. Training should include topics such
as cross cultural and intercultural communications. Additionally, the expatriate may need
a greater understanding of headquarter units than he/she normally acquires within his/her
functional specialization 150 . Cross cultural training should include identifying the
expatriate with the new culture so that he/she will be able to comfortable reproduce the
appropriate behaviours in the new setting151. Additionally it is argued that a level of self
knowledge is essential to be able to effectively adapt to a new culture152. The importance
of cross cultural training is highlighted in the model below. Furthermore, the ability to
communicate with local staff and vice versa is essential to success. Therefore, language
training, even to a beginner level will be beneficial. Even if the company language is
standardized (for instance to English), local staff may not be proficient or completely
capable153. Additionally, we argue that communication styles need to be understood and
included in cross cultural training for intercultural communication to be successful, as
communication encompasses much more than language (for example, body language,
timing, communication channels, etc.). Moreover local staff can also benefit from cross-
cultural training that enables them to operate at maximum efficiency when dealing with
foreigner clients and also with expatriated headquarters staff154. Expatriate assignment
can fail because the local employees are unwilling to modify their behaviour in
149 International management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414 150 IBID 151 IBID 152 Role of Cultural Self Knowledge in Successful Expatriation, Iris I Varner and Teresa M Palmer, Singapore management review, 2005, Volume 27, No. 1 153 IBID 154 International management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
relationship with the visitor155. The training can be administered locally, or by giving
local managers the chance to experience the working culture in headquarters. In many
contexts, the opportunity to work at headquarters or attend training there carries status,
and can be useful incentive to performance156. Additionally, it is important that local staff
also receive training in the company’s official language in order to aid communications
as much as possible. Finally we stress that the more support the organization offers to the
training effort, the more likely that the training will meet its objectives157. In this regard it
is important that headquarters not only supports but encourages and if necessary demands
that employees complete the necessary training.
4.7 Cultural Differences
“It is not only about understanding, but about understanding what the other one
understands” Soren Kirkegaard
“Functions and policies are aimed ultimately at meeting the concerns and goals of the
multinational organization. These include global competitiveness efficiency, local
responsiveness, flexibility, and organizational learning and transfer of information. These
concerns, of course, vary from company to company (Schuler et al., 1993)”158. For this
reason the following section will outline the differences in Danish and Japanese working
cultures. These considerations will be applied in the analysis and recommendations for
the implementation of HRM practices in Japan.
Cultural differences
To highlight some of the key cultural differences between Japanese and Danish culture
we provide the cultural dimensions of Hofstede:
155 IBID 156 IBID 157 IBID 158 International HRM A Cross Cultural Approach, Terence Jackson, Sage Publications, 2002, p.59
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Figure 11
Denmark Japan
02040
6080
100
PDI IDV MAS UAI0
20
40
60
80
P D I ID V M A S UA I
Power Distance Index (PDI) focuses on the degree of equality, or inequality, between
people in the country's society.159
Individualism (IDV) focuses on the degree the society reinforces individual or collective
achievement and interpersonal relationships.160
Masculinity (MAS) focuses on the degree the society reinforces, or does not reinforce, the
traditional masculine work role model of male achievement, control, and power.161
Uncertainty Avoidance Index (UAI) focuses on the level of tolerance for uncertainty and
ambiguity within the society - i.e. unstructured situations.162
Although important, more necessary than cultural dimensions are specific examples of
differences in practices and values in the working environment highlighted below.
159 http://www.geert-hofstede.com/hofstede_denmark.shtml, ITIM Creating Cultural Competencies 160 IBID 161 IBID 162 IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Working Culture
Denmark
Denmark has been classified as being socially individualistic 163 , which means that
although Danish society and working culture is group oriented in many aspects, there is a
strong tendency towards individualistic attitudes as well. From a group perspective,
discussing subject to an agreement is important. It is not common to resolve matters by
vote, but rather through discussions which focuses on seeing matters from all possible
perspectives and reaching a consensus164. Great emphasis is also placed on equality and
the ideal that everyone is equal and must have the same rights regardless of their social or
ethnic background. This is expressed in the so-called “Law of Jante,” which is an
unwritten codex of behavior. It says, among other things, “Do not think you are
something” and “Do not think you are more than others.”165 This may also be reflected in
the low ranking of power distance in Danish culture, as bosses are seen more as team
leaders and group facilitators as opposed to being the key decision makers that delegates
tasks to others166. The ability to co-operate is highly regarded, thus employees are often
encouraged to express their opinions freely at meetings and everyone’s opinion is given
consideration when making decisions167. In this regard, the individual aspect of Danish
working culture is also apparent, as Danes are encouraged to express their individual
opinion directly, even to superiors. It is claimed that there is a “pronounced orientation
toward the self, yet with an obligation to help those who are not able to help
themselves”168. “There is an emphasis on individual initiative and achievement, with
one's competency being more important than his or her station in life. The dignity and
worth of individuals is promoted along with the right to a private life and opinions”169.
163 Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 164 IBID 165 IBID 166 Copenhagen Capacity, Danish Working Culture, 09.02.05, http://www.copcap.com/composite-1355.htm 167 IBID 168 Executive Planet, Danish working culture, http://www.executiveplanet.com/169 IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
In terms of formality, Danish working culture is considered informal and democratic170.
This is reflected in informal dress codes and the norm of addressing superiors by their
first names171. Work emphasized pragmatic decision making depending on the resources
available. “Danes desire that each minute spent on the job is productive and used
effectively”172. This may be because there is also importance placed on the individual
right to have a personal life with family and friends. According to Holt Larsen (1987), a
Danish academic, Danes start their processes by looking at the resources at hand taking a
pragmatic approach rather than focusing on goals and ideals173. Danes use meeting to
keep colleagues and employees up to date, and this constitutes an important part of
Danish working culture. Danes prefer meetings to be short and well structured, with a
preponderance of factual information174. Socialization mechanisms normally commence
in yearly Christmas functions and after work beers usually on Fridays, however these
events do not play as an important role as they may in other cultures. For instance it is
claimed that social life at work is concentrated around the lunch break as many Danes
prioritize family life very highly and go straight home after work175.
Japan
According to Yoko Sano, “it is argued that, if the features of the advanced nations were
individualism, democracy, property rights, a contractual society and openness, then the
Japanese society manifested the contrasting features of collectivism, suppression of
individuality, cooperative systems and insularity”176. Being essentially a group oriented
society, Japanese firms tend to have goals including “unity of feeling for the
organization”, “flexibility in work behaviours”, “stability”, “work regulations” and
170 Copenhagen Capacity, Danish Working Culture, 09.02.05, http://www.copcap.com/composite-1355.htm 171 IBID 172 Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 173 c.f. Cultural dimensions of decision making: Denmark and France compared, Jette Schramm-Nielsen, Copenhagen Business School, Frederiksberg, Denmark, Journal of Managerial Psychology, Vol. 16 No. 6, 2001, pp. 404-423, MCB University Press, 0268-3946, 2001 174 Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 175 IBID 176 Human Resource Management in Japan By Yoko Sano pg.151
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
“ cooperative labour-management relations ” for employee behaviour outcomes177. The
resulting greater mutual commitment found in Japanese organizations may represent a
capturing of the wider societal values of collectivism and humanism. In order to achieve
these goals, communication between labour and management is considered vital. The
previous research made on the Japanese HRM by James Abegglen show that managers in
Japan were very much involved in various private issues of their employees, as they se
them self as parent of the company178. In turn, Japanese employees often view their firm
and the relations within it as family like. Finally when communicating in a collectivist
society such as Japan discussing a person’s performance openly with him or her is likely
to clash head-on with the society’s harmony norms and may be felt by the subordinate as
an unacceptable loss of face.179 As a group, in Japan, almost all work is done as team as
“team production”. In consequence, there is no simple relation between individual skills
and organizational productivity. The efficacy of “organizational productivity” involves
information sharing, an increase in consciousness of belonging to the firm and harmony
in human relations180. Additionally, the work ethic is connected with the individual’s
interaction with the work group. It is through the work group that employees gain their
identity and associate their activity with the michi, or ‘the way’. As Japanese culture is
relatively indirect, to avoid disputes or to resolve them quickly, adequate
communications are essential181. For instance, to avoid conflict in Japan dictates avoiding
saying something to someone which would put him or her in an embarrassing position, or
causing the other difficulties, even in the competitive world of business.182 In Japanese
there is a term Haragei which means the art (gei) of the belly (hara) where the belly
signifies ones “heart”, what one is really thinking. The art is in transmitting one’s
intention without putting it directly into words. The complementary process is to read
(yomu) another’s intentions (hara o yomu).183 In Japan group consensus is reached
177 IBID 178 IBID 179Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992, p.93 180 Human Resource Management in Japan By Yoko Sano pg. 86 181 Human Resource Management in Japan By Yoko Sano pg.151 182 Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992 183 Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
indirectly through ceremonial business practices such as the ringi184 system of decision
making, Nemawushi which is a practice used by management to informally and initially
sound out employee’s ideas on a proposed occurs of action, and ringi seido which is a
formal procedure of management by group consensus. Thus general meetings in the firm
are more a ceremonial closing the previous procedures rather than a place to discuss and
finalize ideas.
Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992 184 “Whereby proposals are generated and decisions reached through a process of drafting by subordinates, discussion at various levels of an organization, and final approval by senior executives. A key feature of this system is that personal responsibility for specific proposals is avoided, even as group harmony is enhanced.” IBID
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
5. Case Study of Danfoss K.K
Theory
Danfoss
How
Analysis
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive Summary
Danfoss KK Japan profile
Danfoss KK Japan established its first Japan based sales office in Tokyo’s Ota Ward in 1961. Locations: Head Office 1168-1 Hotozawa, Gotembashi Shizuoka-ken 412-0046 Japan Shin-yokohama office KC Bldg. 4F. 3-16-1 Shinyokohama-shi Kohoku-ku, Kanagawa 222-0033 Japan Osaka Office Kouie Bldg. 2-8-10 Shibata Kita-ku Osaka 530-0012 Japan The mission of the Danfoss Group, as stated below, is the key for all Danfoss business worldwide
• We will produce and deliver products to the total satisfaction of our customers in global markets with a high degree of environmental consciousness.
• We are a committed group of people with meaningful working lives.
• We will globally promote the Danfoss culture while supporting and respecting local values.
• We will seek to strengthen the societies in which we play an active role
Danfoss K.K Goals: Financial: Min 10% annual growth in overall sales in 2004 & onwards. Work towards an 18% expense ratio by the end of 2005 (2006 budget).Work towards a RONA of 14% by the end of 2008 (RONA=BCR/Assets) Customer: Focus on customer needs & satisfaction Processes: Focus on lean (processes, method approach, procedure, organization, technique, system…), quality & value. President of Danfoss K.K. – Japan Gregers Baungaard Human Resource Manager, Danfoss K.K.- Gotemba Yutaka Goto Danfoss K.K. employs about 62 employees in three offices
Danfoss company profile
History
The company of Danfoss is found by Mads Clausen in 1933 and previously called “Dansk Køleautomatik- og Apparat-Fabrik”. Danfoss is based in Nordborg in southern Denmark.
Location Headquarters Danfoss A/S DK – 6340 Nordborg Executive Committee Chief Executive Officer : Jørgen Mads Clausen Chief Finical officer : Ole Steen Andersen Chief Development Officer : Hans Kirk Chief Operation Officer : Niel B. Christiansen Danfoss business areas Matrix Organization (see table *) • Refrigeration & Air Conditioning • Heating • Motion controls • Industrial controls • Water controls • High-Pressure Water Solutions and • Comfort Panels Financial Information Danfoss net sales experienced growth in net sales from 15,434m (dkr) in 2003 to 16,345m (dkr) in 2004, corresponding to 6 % growth. A 9 % increase more than the previous year. More 20 % of the net sales are covered from markets in Eastern Europe, Russia, Asia, among these China. The markets in North and Latin America also showed positive double-digit growth rates.
*The Matrix Organization Advantages Disadvantages 1. Accommodates a wide var ety of i
Project-oriented business activities.
Can create confusion and contradictory policies by allowing dual accountability.
2. Maximizes efficient use of functional managers.
Necessitates tremendous horizontal and vertical coordination.
3. Enhances coordination
Conclusion
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Danfoss Vision The Danfoss Vision defines the desired future state of Danfoss, as well as our desired place in
the market. A vision is a dream of what we want to achieve in the future. Danfoss will be … … a global leader... …
… within our core businesses ...
... as a highly respected company …
… which improves quality of life …
… by mastering advanced technologies …
… in customer applications …
… while creating value for all stakeholders. Danfoss Japan Mission Statement In addition to our global Danfoss Mission, the management at Danfoss Japan has developed he following mission statement, which is specific to Danfoss Japan and defines our purpose as ll as what expectations and values are promoted on a daily basis.
twe
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
The case study will be presented through a resume of five perspectives including our
team member’s observation period, our interviews, our survey data, and the EPS data
provided by Danfoss.
Our team member began working for Danfoss in September 2004 in the Shin Yokohama
office. She worked consistently in both the Shin Yokohama and Gotemba office,
although only visited the Osaka office once.
Our team member’s perception was that motivation was low. She noticed that there was
little participation by local staff in strategic meetings, and that staff had various
complaints about the circumstances. For instance, both local employees and expatriates
complained about communication and cultural understanding problems, and some local
employees complained about their compensation levels.
Both the Danfoss Asia and Danfoss K.K presidents commented that the level of
motivation in Japan is low. Possible reasons presented for this were the lack of attention
from HQ in Japan, low levels of integration into the rest of the company, the perception
of Danfoss as a foreign company, the employee’s lack of aggressiveness and “wanting to
do something extraordinary”, and the re-organization of the Gotemba office. It was
mentioned that the situation could be improved through better communication with other
areas of Danfoss, such as the factories. Currently Danfoss K.K uses economic incentives
based on performance to motivate employees.
The Employee Perception Survey (EPS) showed that local staff were least motivated by
wages and conditions of employment (satisfaction rated 48% as compared to the Danfoss
average of 68%), pay compared with similar outside jobs (46%, Danfoss average 60%),
and other conditions of employment compared with similar outside jobs (55%, Danfoss
average 74%). Additionally job security was a great concern, 45% felt secure compared
to the company average of 69%. This factor has also influenced negatively some of the
motivational factors such as overall satisfaction and motivation and faithfulness, which
clearly show that the Gotemba averages are much lower than the rest of Danfoss K.K.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Finally, the perception of top management was low, 57% compared to the Danfoss
average of 72%. According to our team member’s observations it seems that motivation
is affected by cultural misunderstandings. Finally the Japanese subsidiary represents the
second lowest country in the country map after Malaysia which is in a critical position.
Our questionnaire data supported the above, showing motivation to be at 63%.
However, employees seem satisfied with the level of opportunity for professional and
personal growth, 66% as compared to the company average of 65%.
The ability in Danfoss K.K can be viewed from many perspectives. The perception of
local employee’s abilities is not high. On the other hand, the EPS survey revealed that
employees view top management’s ability to make the right decisions as low, 55%
compared to a company average of 69% as well as top management’s talent to think
globally, 51% compared to a company average of 70%. Additionally, our questionnaire
data showed that the Japanese employees do not view themselves and their colleagues as
being very capable (55%), they also indicated a lack of training (necessary training in
Danfoss: 57.5%). This is the lowest section of our data from our questionnaire. Danfoss
K.K offers leadership competency training programs, and sends its employees to
conferences periodically.
In Danfoss there are various training programs and seminars held, periodic company
social events, and an intranet which according to all of our sources works very well. Our
questionnaire proposed a relatively high level of opportunity for employees in Danfoss
K.K in terms of opportunity to learn and form a career. However, our questionnaire also
showed that employees indicated a lack of training.
Our team member’s observations showed that integration in Danfoss K.K is good
between the local employees and between expatriate employees, however very poor
between the local and expatriate employees. We found that integration between local
employees and expatriate employees was considered low, and was ranked at 0%. It was
also noted that general integration of the subsidiaries was expressed as poor, as the
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
subsidiaries do not view themselves as a part of Danfoss Asia or even just Danfoss, but
identify much more with their own subsidiary. Our questionnaire showed that integration
between local employees was the highest ranked section, with 67%. However, the
integration between local and expatriate employees was ranked the second lowest at 55%,
especially socialization with foreign employees was especially low at 40%.
According to our team member’s observation period communication in Danfoss K.K
between Japanese employees is good, however communication between local and
expatriate employees is very poor. For instance in the general meetings there is very little
discussion about strategies and ideas, as the expatriate employees are outspoken, while
the local employees remain silent. The EPS survey ranked top management’s ability to
inform the employees at 51% compared to the Danfoss average of 65%. Top
management’s ability to clearly communicate visions and strategy was ranked at 57%
(Danfoss average: 70%), and their ability to clearly communicate goals and results was
ranked at 58% (Danfoss average: 72). It was noted that communication style differences
are a main cause of this. Direct versus indirect approaches and high versus low context
communication styles were main differences noted. Communication is also hindered by
the location of the Gotemba office. The data from our questionnaire also showed that
communication was low, and that communication with HQ was lower than
communication with other subsidiaries.
The report from our team member’s observation period showed that the core culture of
Danfoss may be understood by the local employees, but it doesn’t seem very deeply
ingrained in them. Additionally, due to cultural differences there did not seem to be a
high level of shared values. It appeared that the working cultures of the expatriates and
local employees remained different, somewhat running parallel to each other, and at
times becoming a cause of conflict. For instance, the EPS survey showed that local
employees viewed the ethics of Danfoss top management to be 61% compared with a
company average of 73%.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
6. Discussion: Application of Theory to Danfoss K.K. Executive Summary
Introduction In the Analysis section we will discuss the connections between the empirical findings
and our theoretical model. We will use a TOWS analysis to determine the strengths,
weaknesses, opportunities, and threats presented to Danfoss according to our model. We
will make recommendations as to which HRM practices should be implemented and how.
Methodology
Figure 12
Communication
Communication between local employees and between expatriates in Danfoss K.K is
strong. Additionally communication between regional managers and between managers
and headquarters is good. Danfoss has recognized the necessity of improving
communication and has thus implemented a leadership development programme for
managerial level. In lower levels there are some cross boarder projects and some transfer
of employees. There is also a fair amount of travel, providing the chance for face to face
meeting.
Theory
What
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
How
Conclusion
67
Sources of Corporate Culture Competitiveness: The Danfoss Universe
However, the main area of concern is the communication between expatriates and locals.
The expatriates perceive that the local employees should change their style of
communication to become more aggressive and express their ideas more directly.
Currently, the communication is one way from the expatriates, as the local employees do
not express themselves directly. There is frustration as local employees do not seem to
express initiative in meetings and planning while the local employees are also frustrated
as they are not provided with the working culture they are used to expressing their ideas
in, indirectly. The perception that the local employees should change is not effective in
improving communications. The expatriate’s attitude toward communication with the
local employees is positive in that they desire more effective discussions, and for the
local employees to have a role in decision making. They would also like to be sure that
the local employee’s needs are met. The problem is that despite good attitudes, there has
been little done to ensure that expatriates and local employees have the intercultural
communication tools to effectively interact. Additionally, this situation has been
recognized by management who seem willing to work on the problem before it worsens.
If nothing is done to improve communications it will continue to effect areas such as
integration, motivation, and knowledge transfer.
Additionally the communication between the three offices is generally poor. The
managers of each office meet approximately once or twice a month, and because the HR
office is located in a different office than the president, a strategic communication point
is broken. The main effect of this lack of communication is lower integration between
Danfoss K.K employees, which may in turn inhibit the creation of a shared culture.
However, it has recently been decided to sell the building in Gotemba and expand the
office in Shin Yokohama. This provides an opportunity to bring necessary departments
together, and to improve general communication, especially between the president and
HR.
Although some expatriates communicate well with headquarters, local employees have
limited communication. The expectations for communication differ between local
employees and headquarters as local employees are indirect and do not feel very
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
comfortable approaching headquarters as they do not have a direct relationship. On the
other hand, headquarters expects that the local employees will contact them if they are in
need of support or advice. Additionally, as the communication within the subsidiary
(between local and expatriate employees) is poor, headquarters may not receive clear
communication from the subsidiaries. From a long term perspective once communication
within the subsidiary begins to improve, communication with headquarters will follow.
Motivation
Low levels of motivation have been one of the main concerns in Danfoss K.K. This could
be because of differing perceptions of what motivation is, and how to motivate an
employee. From our different sources our understanding is that local employees are
making an effort to complete their tasks well and participate in the organization. However,
the working culture has been formed through expatriates working style which in its
differences to the Japanese style has caused friction and misunderstandings, as this has
not been accompanied by cultural training or adaptation to the local culture. Furthermore,
locals have demonstrated certain levels of frustration about the compensation of the
expatriates and feel that they get special treatment. This should be studied and Danfoss
KK should avoid signaling a difference in treatment.
Managers have unsuccessfully tried to implement different motivational policies such as
performance based incentives. However, motivation in Japan is difficult to achieve by
these means, as it is rather a long term process based on group identity and paternalistic
relations with the organization, which fosters loyalty and faithfulness. For this reason
other factors such as integration, communication, and shared values and visions play a
very important role in the long term to achieve a more intrinsic motivation. Additionally,
the sales initiative of Gotemba has had a large impact on employee motivation as it
affects senses of job security, which is central to motivation in Japan. However, if
managed correctly this could have a positive affect on integration and communication. If
the motivation is not improved in Danfoss K.K it could prove to be a threat to effective
operations. This needs to be treated very carefully.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Integration
This section presented big contrasts. While the integration between Local employees was
one of the highest factors, the integration between expatriates and local employees is an
area of major concern. The division is affecting many factors in the subsidiary, such as
communication, shared culture and the motivation of both expatriates and local
employees. However in Japan integration cannot be achieved in the short term.
Integration should come from a joint effort in trying to understand the different working
cultures and being able to compromise to work together as a team. Some efforts are being
made. There is a need of having more regular cultural workshops and integration
workshops. We have noticed that programmes established in other subsidiaries such as
the “introduction day” have not been applied in Japan.
The fact that the integration of local employees is high represents an important starting
point. Another positive aspect is the good relationship between employees and their
immediate superior.
As for integration of the subsidiary with headquarters Japan was rated as the second
lowest country after Malaysia, which is in a critical condition. That might indicate that
Japan is not well integrated into the rest of Danfoss. We have noticed that Danfoss K.K
has not been given a significant role and may not be a subsidiary of focus. However,
Japanese investment in other areas of Asia and Danfoss K.K’s long term experience in
the region, combined with a growing focus in Asia as a region represents an opportunity
for Japan to become better integrated to the rest of the company.
The lack of integration of Danfoss KK to the overall company has in turn affected the
effective internalization of Danfoss core values. It is also affecting the transfer of
knowledge, as there is little interest from Japanese local employees in helping other
areas/Headquarters and vice-versa. Integration within Danfoss K.K represents an
important area of concern as there is a big contrast between local-local integration and
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
between local employees and expatriates. Thus the link to the Headquarters and the rest
of the company is “broken”.
Corporate Culture
Corporate culture and share visions overall represent an average section. Results from our
empirical data demonstrated that while there is an identifiable level of culture within
Danfoss KK this is not well linked to the overall Danfoss culture and it is not internalized
by the employees. Japanese employees identify themselves more with Danfoss KK rather
than with Danfoss as a whole. Instead of internalizing the core values of Danfoss, a
Danfoss style has been established relating to products, training and other artifacts.
Employees in Danfoss KK perceive the subsidiary as a Japanese firm; on the other hand
Danfoss expatriates have been trying to transfer the notion of Danfoss as an international
company. The internalization of core values is a long term process. Efforts have to be
made in the long run to establish regular seminars and workshops about the company’s
vision, mission and goals. Good relations between expatriates and Local employees
represent an important factor to being able to improve the effective understanding of the
Danfoss organizational culture. The organizational restructuring of Danfoss KK can be
an opportunity to being more proactive in promoting the Danfoss culture.
Ability
Japanese employees in Danfoss KK are perceived by managers as being extremely
organized in a demanding system while having the strictest quality demands. However
results from the applied questionnaire showed ability to be the second lowest factor.
Japanese employees do not view themselves and their colleagues as being very capable.
They also indicated a lack of necessary training in Danfoss. This could be a reflection of
lack of motivation as training has been pointed to be a source of motivation for Japanese
employees. There are many perspectives from where you can see ability in Danfoss KK.
Staffing/recruitment policies could be an area of opportunity to increase overall ability in
the subsidiary. Training in the areas where employees perceive a lack of ability can also
help improving motivation.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Opportunity
Opportunity for Danfoss K.K employees to interact with employees from other areas of
Danfoss appears high. There are various training programs and seminars held, periodic
company social events, and an intranet which according to all of our sources works very
well. Our questionnaire proposed a relatively high level of opportunity for employees in
Danfoss K.K in terms of opportunity to learn and form a career. However, our
questionnaire also showed that employees indicated a lack of training, which may suggest
that the employees do not feel they have access to, or are not aware of some of the
opportunities available, and the opportunity to learn from HQ and other subsidiaries was
low. The fact that Danfoss provides the needed opportunities is a great strength of the
company. Danfoss KK should encourage its expatriates and local employees to gain from
this. This area could be a great source of strength to improve other factors.
Knowledge Transfer
As Danfoss employees in Danfoss K.K do not see themselves as a part of Danfoss as a
whole, or Danfoss Asia there is less propensity to help others or share knowledge.
Additionally, according to managers there is no culture to share information about issues
like communication processes or management. As the levels of integration are low
between expatriates and local employees knowledge transfer is weakened. There are
some opportunities for knowledge transfer to occur due to the BA organizational
structure. This provides the opportunity to share knowledge; however, the knowledge
transferred is mostly of a technical nature. Knowledge transfer was the fourth worst
ranked section of our questionnaire. However, some managers have identified the
potential value of knowledge transfer and believe that Japan has a lot to teach other
subsidiaries in areas such as quality control and customer service. This provides an
opportunity to develop knowledge transfer into the culture of Danfoss.
HRM Practices
HRM practices in Danfoss K.K are weak as according to managers there is not a real
strategy for HRM in Asia. Additionally, according to the mangers HRM in Asia lacks
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
competencies and professionals with understanding of global companies and cross
cultural issues. In Danfoss K.K the HRM department runs like an administration office,
and weak communication between HRM and the President hinders the creation of
policies appropriate to the context. Rather, the evidence suggest that HRM practices are
an arbitrary blend of Japanese and Western practices, and there are many inconsistencies
concerning the treatment of expatriates and local employees resulting in friction, low
integration, and low motivation. Additionally, HRM practices have not been tailored to
hire and train employees with cross cultural abilities and communication abilities, which
in turn affects the potential levels of knowledge transfer and successful communication.
In the Japan office there is no one directly responsible for HRM policies or strategy, and
various persons fill various roles. Many HRM decisions are made by the president, with
no input from his Japanese colleagues due to communication style differences.
Headquarters have not been pro active in encouraging or supporting the HRM
department in Japan. The lack of HRM competencies poses a threat to the optimization of
Danfoss K.K.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
6.1 Recommendations TOWS
Strengths (S) 1. Local-local integration 2. Local-local communication 3. Japan’s high level of skills and overseas investments
Weaknesses (W) 1. Communications 2. The perception of different treatment of expatriates and local employees 3. Low Motivation 4. Low local and expatriate integration 5. Danfoss employees perceive themselves and colleagues as having low levels of ability 6. Managers (and families) lack of training in intercultural abilities prior and during expatriation period.
Opportunities (O) 1. Sale of Gotemba 2. Cultural values based on artifacts, i.e. technicalities 3. Recognition of the skill set in Japan 4. Danfoss provides opportunities for travel, workshops, and training.
SO 1. The sale of Gotemba represents a turning point which can be capitalized as an opportunity to develop the internalization of core values to a deeper level. 2. Draw from the high integration and communication levels already apparent in locals. 3. Use Japan’s high level of skills and overseas investments to increase the subsidiary’s integration into Danfoss Asia and Danfoss as a whole. This will also improve knowledge transfer.
WO 1. Use the sale of Gotemba to improve communications between departments, and to improve the consistency of HR practices to improve the perceptions of treatment. 2. Use the opportunity for workshops, travel, and training to improve communicative ability. 3. Encourage the usage of the opportunities to travel, hold workshops and provide training to improve intercultural and integration programs. Enforce usage on managers. 4. Provide employees with training to improve abilities perceived as week.
Threats (T) 1. Little HR support from HQ and general low HR competencies in Japan. 2. Low levels of knowledge transfer 3. Further disintegration of Danfoss K.K from Danfoss Global. 4. Low levels of motivation and integration between expatriates and local employees could be a threat.
ST 1. Use opportunities for integration and cultural workshops to improve integration between local and expatriate employees. 2. Use resources for training to help improve motivation of employees.
WT 1. HR support from HQ and HR competencies in Japan need to be improved in the short term in order to increase motivation and levels of integration. 2. Integration between Danfoss K.K and Danfoss Global needs to be improved to prevent losing knowledge transfer opportunities and to avoid allowing the further loss of identification with Danfoss Global.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
We have highlighted the main areas of strength, weakness, opportunities, and threats
which Danfoss currently faces. These are combined to provide strategic
recommendations to Danfoss. These recommendations include using the sale of the
Gotemba office as an opportunity to develop the internalization of core values, increase
communication (especially between the president and the HRM department), and to
foster integration using the levels of integration already apparent between locals; Making
better use of the opportunities for travel, training, and workshops to train employees in
the areas of intercultural communications and to improve their level of motivation and
(perceived) ability; Improve the HR competencies greatly by increasing contact with the
headquarters HR department, administering training, and providing a long term HR
strategy.
In addition to the above recommendations, we recognize the need to implement a more
comprehensive system of HRM practices in the short term. Staffing policies can be used
to bring talented employees into the firm with the intercultural and communication
abilities necessary for Danfoss, as well as to concentrate on hiring staff that will “fit”
with the culture of Danfoss. It is important to hire staff in Danfoss Japan with cross
cultural skills who will be able to help in mediating misunderstandings and cultural
differences. This is especially relevant for the HRM department, which currently lacks a
strategic position in motivation, integration, and ability. Staffing policies which use
internal promotion can increase the level of motivation of local employees, as well as for
expatriates by providing a goal and career track. A focus needs to be placed on selecting
and giving proper intercultural training so that expatriates can be effective managers in
the complex scenario of Japan and Asia. For instance, it has been recognized that
expatriates who have a strong individual streak or are an aggressive exponent of Western
management concepts are unlikely to thrive in an environment such as Japan185.
Promotion should take into consideration that long-term employer-employee commitment
and a seniority based promotion system which rewards loyalty are considered important
185 Big in Asia, 25 Strategies for Business Success, Michael Backman and Charlotte Butler, palgrave Macmillan, 2004
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
promotion criteria in Japan. If this system should be changed, it must be ensured that
promotion policies are consistent between expatriate and local employees, and that local
employees understand the basis upon which they can be promoted. It may also be
recommendable to allow space for negotiation when planning promotion policies, as
Japanese employees may become more unmotivated by a system which solely rewards
individual gains at the expense of group loyalty and identity.
Training should be used as a form of motivation, an opportunity for employees to
integrate through shared experiences, to increase the ability and perceived abilities of
employees, and finally to bring employees closer to the Danfoss culture. In Japan training
can be a great source of motivation for employees. It is important that local employees
receive cultural training about Denmark in order to better understand their expatriate
colleagues, their expectations, and the differences in the working culture. It is very
difficult to motivate employees who work in a system they do not understand. Training in
language is essential to improving intercultural communications, and although the
company language may be English, a basic knowledge of Japanese could help expatriates
integrate into the culture. Additionally, the more support the organization offers to the
training effort, the more likely that the training will meet its objectives.186Expatriate
managers should also be warned that bad news rarely travels up and so they will have to
look carefully for clues about staff dissatisfaction. Japanese staff will never become
outspoken and aggressive, and so managers will have to make an effort to compromise in
communication styles. Expatriates in Danfoss K.K. should also keep in mind that
managers are expected to have a paternalistic, caring attitude, but remain distant.
Managers may also have to set more time aside in Asia to monitor staff output.
Appraisal systems and incentives should be used to motivate employees, to encourage
employees to upgrade their abilities, and to encourage employees to develop their
willingness to communicate and share knowledge. In an Asian context it is important to
understand that employees are normally intrinsically motivated and thus using only pay
186 International management Cross Cultural Dimensions, Second Edition, Richard Mead, Blackwell publishing, 1998, p.407-414
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
based incentive schemes may not be the most effective method. For instance, singling out
high-performance staff for praise might be counter-productive. It might be interpreted as
an attack on everyone else and the singled out staff might feel to blame rather than proud.
An effort should be made to congratulate team accomplishments, even if it means that
some in the team do not deserve 187 . Incentives often focus on external factors of
motivation, rather than the internal needs or drives of individuals. This is an area over
which the manager has more influence when motivating subordinates: making sure the
incentives match the needs. In this context it is important that the expatriate manager is
able to understand and fulfill the needs of employees of another culture.
Career management in turn can also help to improve motivation and integration by
placing employees on a path similar to their peers. Job security will also increase the
levels of motivation, and if espoused as a company value may aid in the internalization of
Danfoss’s culture.
Lastly corporate socialization and collaborative work will increase the motivation among
local employees by increasing the levels of integration and group identity. These
opportunities will also provide employees the chance to practice their communication and
group building skills. In Japan employees expect to behave as family members, and when
planning corporate social events this mentality should be taken into consideration.
If there are problems implementing new HRM strategies in Danfoss Japan it can be
helpful to bring in an outside agency to help make changes, to avoid accusations of
unfairness or lack of understanding and/or caring.
Finally, it is important that Danfoss headquarters supports expatriates in both
accustoming to the local culture and managing effectively. Headquarters needs to ensure
effective communications between themselves and their overseas managers. It is essential
that Danfoss headquarters takes a pro active role in Asia to ensure that a comprehensive
187 Big in Asia, 25 Strategies for Business Success, Michael Backman and Charlotte Butler, palgrave Macmillan, 2004
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
strategy concerning HRM is being implemented as Japan most likely will not ask for help
in this regard. Additionally, as a future consideration Danfoss could attempt to increase
the rotation of managers and increase the levels of repatriation especially at senior levels
where expatriate knowledge and experience could be used to coordinate communications
between the Headquarters and the countries where they had worked.
6.2 Economic Considerations
We will now shortly present some of the economic considerations that Danfoss can take
before investing in the creation of the “intangible assets” such as motivation, knowledge,
information etc.
The Blackwell book of organizational learning and knowledge management presents a
chapter titled “Knowledge Management: What can organizational economics
contribute?” They propose that the influence of alternative organizational arrangements
on value-creation may be analyzed in terms of motivation, knowledge, information, and
complementarity – and how alternative arrangements embody different ways of
influencing these variables (Buckley and Carter, 1996)188. “Motivation etc. are all in
different ways related to those transaction costs that (in various guises) are central in all
organizational economics theories, and whose size influences the value that may be
created in a world with no problems of motivation, etc. (a “first-best” situation), and,
hence, no transaction costs”.189 Thus Danfoss should analyze the possible costs and
benefits of incentives, Knowledge Management, training, Human resources practices etc.
According to Chris Doucouliagos and Pasquale Sgro case studies of 7 enterprises, for
analyzing training costs data is needed in the following four categories: Measure of
performance, measure of the training, costs of the training and benefits arising from the
training.190 They go on to remark that for most organizations the major difficulty in the
data collection process will be the collection of benefits data and the measurement of
benefits. 188 The Blackwell Handbook of Organizational Learning and Knowledge Management, Nicolai J. Foss and Volker Mahke, Edited by Mark Easterby-Smith and Marjorie A. Lyles, Blackwell Publishing, 2003, p.81 189 c.f. IBID 190 Chris Doucouliagos and Pasquale Sgro enterprise return on a training investment 11 June 2000 NCVER publications
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
Often, it may be necessary to seek the co-operation of areas other than the training
function within the organization for data on benefits, and often, some of the benefits
cannot be quantified. They propose 4 steps for calculating the ROI: 1. collect data 2. Pre-
and post-testing 3. Multivariate analysis and 4. Calculate ROI. Cross cultural,
intercultural, expatriate training etc. estimate costs vary; however most researchers agree
that cross cultural training can be costly. The 7 case studies of companies in different
industries presented by Doucouliagos and Sgro received a positive ROI on their training
program and all of those were large (323%, 1000%, 1277%, 256%, 7125% 30%, 980%).
However we do not include a full ROI analysis of Danfoss K.K because we lack the
relevant information, resources and time.
7. Conclusion
Through theoretical and empirical review we have been able to provide a substantial
analysis of Danfoss and its subsidiary in Japan, as well as answer our research question.
Our conceptual model proved to be an effective tool for identifying and highlighting key
areas that Danfoss needs to improve. First and foremost Danfoss needs to develop their
intercultural communications capabilities within Danfoss K.K and between Danfoss K.K
and headquarters. Additionally, the poor integration between expatriate and local
employees in Danfoss K.K is affecting the levels of motivation and communication.
These aspects seem to be hindering knowledge transfer. Perceptions of ability by local
and expatriates employees are in turn lowering motivation. Finally we found that the
opportunities in Danfoss are a strong aspect, and should be used to improve the other
areas. By improving communication and integration Danfoss should be able to transfer
their core values to Danfoss K.K to a deeper level. In doing this they can potentially set
the ground for building a corporate competitive culture. In answering our research
question:
Theory
How
Analysis
Danfoss
What Why
HRM
How
Model
Why
Knowledge
Management
Int.
Communication
Org. Culture
What
Methodology
Introduction
Executive Summary
Conclusion
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
How can HRM practices help to maintain corporate core values, and improve
intercultural communications and knowledge transfer within Danfoss K.K. and
between Danfoss K.K and headquarters?
We have concluded that through staffing, training, appraisal systems, incentives, job
security and collaborative work, corporate socialization mechanisms, and career
management and development when applied as a system of mutually reinforcing
practices, HRM can help MNCs to achieve higher outcomes, in terms of the degree of
knowledge transfer, maintenance of core values, and improvement of intercultural
communications. These HRM practices will positively affect ability, motivation,
opportunity, and integration which have shown to increase levels of social capital and
absorptive capacity, and thereby knowledge transfer. We have also found that these
processes should be coupled with training for intercultural communications and cross
cultural abilities supported by a strong culture.
By applying these findings to Danfoss we have been able to provide recommendations to
improve their operations in Danfoss K.K. We have proposed that they begin by
developing a HRM strategy that is in line with the goals of Danfoss. This strategy should
be supplemented by enhancing the HRM capabilities in Danfoss K.K, and should take
into consideration the weak areas we have pointed out.
Thus we have followed the structure of “what” “why” and “how”, showing that HRM
practices by influencing set determinants, coupled with intercultural communications and
a strong corporate culture can increase the level of knowledge transfer and corporate
culture competitiveness in the MNC.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
8. Indications for Future Research
Future research in this area could include statistical examination of our conceptual model.
Additionally theoretical areas such as disseminative capacity and organizational structure
could be considered within our framework in future cases. The role of IT has not been
taken into consideration in this case; however it is a pre-requisite due to the distances in
space between subsidiaries and headquarters and should be studied further in connection
to our research topic. Furthermore, the question of “who” in terms of who possesses
knowledge in an organization could also be examined in light of our current paper. Other
HRM practices and/or determinants, not examined in this paper could be interesting areas
of future research. Finally, the application of our model could be applied in other
countries where the MNC is facing a similar situation as in our case.
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Sources of Corporate Culture Competitiveness: The Danfoss Universe
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The Seven Cultures of Capitalism: Value Systems for Creating Wealth in the United States, Britain, Japan, Germany, France, Sweden, and the Netherlands Hampden-Turner, C. and F. Trompenaars, London, Piatkus, 1994 Towards a Model of Effective Knowledge Transfer within Transnationals: The Case of Chinese Foreign Invested Enterprises, Paul Miesing, Mark Kriger, and Neil Slough, for the Journal of Technology Transfer, 2003 Transactive memory directories in small work unity, Vesa Peltokorpi, emerald, vol. 33, no.4, 2004 Working in Japan: An Insider’s guide for Engineers, The Modern Working Environment in Japan Hiroshi Honda- Editor, Raymond C. Vonderau, Kazuo Takaiwa, Daniel Day, Shuichi Rukuda- contributing editors, ASME Press, New York 1992 Web References Copenhagen Capacity, Danish Working Culture, 09.02.05, http://www.copcap.com/composite-1355.htm Danish ministry of science technology and innovation, source: Eaton Consulting Group, http://www.workindenmark.dk/Work/0/4/0 Executive Planet, Danish working culture, http://www.executiveplanet.com/ ITIM Creating Cultural Competencies, http://www.geert-hofstede.com/hofstede_denmark.shtml, Wikipedia online dictionary, http://www.wikipedia.org/ Interviews/ Presentations Dana Minbaeva, May, 23 2005 Kasper Leschly, Intercultural Challenges for IKEA in China, Asian Studies Program: Intercultural Communications, 12th December 2003
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In 1995 Nonaka and Takeuchi publishedCompany”, considered to be a key turManagement. They begin the book by prese
“The ball gets passed within the team as it mpassed around in the team contains a sharedfor, where it is gong, what kind of a world it a reality. Highly subjective insights, intuitio“what” the ball contains-namely, ideals, v“how” the ball gets passed around in rugbyrunner to the next in a relay race, the ball manner. Unlike relay, it does not move lineais borne out of the team member’s interpla(“here and now”), based on direct experiintensive and laborious interaction among mabout ideals as it is about ideas.”
The conceptual model this project presentsof the many ways it could be completed: LThe coaches represent the Human Resourcon selecting players with the necessary abimotivating and integrating them and therethe communication between the team is brthe coaches have to make sure that theeffective. Also if the players in the back group the team will become less compmanagement practices and training the coteam. We apply this metaphor to Danfoss K
Knowledge Management – OrganizationHuman Resources Management, a
petitiveness: The Danfoss Universe
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their book “The Knowledge Creating ning point in the study of Knowledge nting the Rugby Metaphor:
oves up the field as a unit. The ball being understanding of what the company stands wants to live in, and how to make that world ns, and hunches are also embraced. That’s alues, and emotions. Now let’s focus on . Unlike how a baton gets passed from one does not move in any defined or structured rly or sequentially. Ball movement in rugby y on the field. It is determined on the spot ence and trial and error. It requires an embers of the team. Similarly, it is as much
intends to complete this metaphor in one et’s then focus on the coaches of the team. es Management Practices that would focus lities; providing them with opportunities; by achieving the team’s goal. However if oken the team can become divided. Thus communication between the players is are not well integrated with the forward etitive. Thus through human resources ach can improve the effectiveness of the K.
al Culture – Intercultural Communications Case Study: The Danfoss Universe