Influence of Culture on Strategic Human Resource Management (SHRM ...

Influence of Culture on Strategic Human Resource
Management (SHRM) Practices in Multinational Companies
(MNC) in Kenya: A Critical Literature Review


Presented By
PROFESSOR PETER K’OBONYO

BEATRICE DIMBA
(PhD Candidate: Strathmore University, Kenya)

Contacts:
Professor Peter K’Obonyo
Deputy Principal
University of Nairobi, Kenya
College of Humanities and Social Sciences
P O Box 30197, Nairobi, Kenya

Beatrice Dimba
Ole Sangale Road,
P O Box 59857 00200 Nairobi, Kenya
Tel: (254-020) 606155
Fax: (254-020 607498
e-mail: bdimba@strathmore.edu

June, 2007


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Abstract: Extant theories of strategic human resource management (SHRM) practices and cultures
have generally adopted on the one hand the assumption that organizations develop a culture of
their own that is distinct from the national and industry contexts in which the organization is
embedded, thus ignoring the potential impact of external environmental factors on organizational
culture. On the other hand, some researchers and scholars have questioned the validity and
reliability of national culture-SHRM practices research.

The current paper explores the employee cultural values in the Kenyan multinational companies
(MNCs) and the influence of culture on SHRM practices. Hofstede’s cultural dimensions of
collectivism, power distance, uncertainty avoidance, and femininity are applied. These value
dimensions reflect human thinking, and feelings of people, which pose basic problems that any
society has to cope with but for which solutions differ.


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Definition of Terms
Strategic human resource management (SHRM)
Strategic human resource management involves the development of a consistent, aligned collection
of practices, programs (strategies), and policies to facilitate the achievement of the organization’s
strategic objectives (Mello, 2002).

Strategic human resource management practices
SHRM practices are those decisions and actions which concern the management of employees at
all levels in the business, and which are related to the implementation of strategies directed
towards sustaining competitive advantage (Miller 1987). Therefore organizations develop a
culture of work practices. Examples of SHRM practices are recruitment practices, staff appraisal
systems, remuneration systems, and work flexibility arrangements.

National Culture
These are values, beliefs, and assumptions learned in early childhood that distinguishes people in
one society from those in another (Beck and Moore, 1995; Hofstede, 1991).

Cultural Value Dimensions
Empirically determined main criteria by which the national cultures differ. There are four such criteria,
which are labeled by Hofstede (1980) as dimensions; these are Power Distance, Uncertainty Avoidance,
Individualism-Collectivism, and Masculinity-Femininity.




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OVERVIEW
Of all the factors affecting strategic human resource management (SHRM) perhaps none is more
potent than the national culture. This is because the values underlying human resource
management (HRM) are not based on individual country’s values. As Kanungo (1995, p. 11)
pointed out:

“…because many of our human resource management tools have been developed primarily
within a context of economically developed nations, most have never been appropriate for
use in developing countries. Traditional US-based HRM theories, in particular,with their
lack of contextual embeddedness, their strong individualistic orientation, and their
emphasis on freewill… mismatch what is most salient about the nature of work and human
systems in developing countries”.

Aycan et al (2000) contend that because of the increasing demands of the globalized and
liberalized business environment, both researchers and practitioners have started paying more
attention to the study of culture as an explanatory variable. The researchers have also come to
realize that the uncritical adaptation of SHRM practices and techniques evolved in the context of
Western cultural values may not be effective in other socio-cultural environments.

Extant literature (Gelfand, 2000) reckons that managers in organizations are recognizing that it is
impossible to maintain parochial views while doing business across cultures. Cultural knowledge
and a global focus are crucial to survive, and to thrive, within today’s business environment.
However, the same literature does not give a global focus that is commensurate with the global
reality of business. Discussion and empirical assessment of culture and human resource
management practices (Aycan, et al, 2000) has been focused on specific developed countries and
developing countries have been given little attention (Nyambegera et al, 2000). The current paper
intends to analyze the employee cultural values in Kenyan multinational companies (MNCs) and
the influence of culture on SHRM practices. Hofstede’s (1980) cultural dimensions of
collectivism/individualism, power distance, uncertainty avoidance, and femininity/masculinity will
be applied.



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The Concept of Culture
To understand the implications of cultures within an organization it is important to understand the
basic concept of culture:

“…the core of culture is composed of explicit and tacit assumptions or understandings
commonly held by a group of people; a particular configuration of
assumptions/understandings is distinctive to the group; these assumptions/understandings
serve as guides to acceptable and unacceptable perceptions, thoughts, feelings and
behaviors; they are learned and passed to new members of the group through social
interaction; culture is dynamic – it changes over time” (Milliken and Martins, 1989).

The implication of this definition is that culture is a collective social phenomenon (Milliken and
Martins, 1989). For instance management communicates organizational work culture through
practices of recruitment, staff appraisals, remuneration and flexible work arrangements. All these
practices are aspects of social interactions. Organizational culture can, therefore, be created, rather
than just inherited by employees. Once in existence, it subtly influences perception, thought,
action, and feeling of the employees in ways that are consistent with their cultural reality. It guides
the selection, interpretation, and communication of information in ways that are meaningful to the
employees. To understand organizational culture, one must understand the basic assumptions of
the employees, namely, their national cultural values and beliefs. Culture is not a characteristic of
individuals; it encompasses a number of people who were conditioned by the same education and
life experience.

Hence culture of a group refers to the collective mental programming that these people have in
common; the programming that is different from that of other groups or nations. Culture in this
sense of collective mental programming, is often difficult to change. This is so because it is shared
by a number of people, and because it has become crystallized in the institutions these people have
built together. Hofstede (1980) reckons that most countries’ inhabitants share a national character
that is more clearly apparent to foreigners than to the nationals themselves.

Consequently whereas typically, cross-national comparative research has asked “When, and under
what conditions do certain cultural identities become salient and more relevant than others?” and


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“How do various cultures interact?” (Dahler-Larsen, and Hernes 1997), it may be more meaningful
to ask questions such as:
“How do national cultural values affect SHRM practices in less developed African countries?”

THE THEORETICAL BACKGROUND
Research (Sonja and Phillips, 2004) assumes that managers in today’s multicultural global
business community frequently encounter cultural differences, which can interfere with
management practices in organizations. In comparing cultures of different countries, cross-cultural
researchers have concentrated effort on an examination of a set of cultural value dimensions
developed by Hofstede. Dominant value systems of different countries can be ordered along
Hofstede’s set of cultural value dimensions (Hofstede, 1980; Hofstede and Bond, 1988). People’s
Dominant value systems have been crystallized in the institutions these people have built together:
their family structures, educational structures, religious organizations, associations, forms of
government, work organizations, law, literature, settlement patterns, and buildings. All of these
reflect common beliefs that derive from the common culture. Whereas the value systems affect
human thinking, feeling, action, and the behavior of organizations and institutions in predictable
ways, the value dimensions reflect basic problems that any society has to cope with but for which
solutions differ from country to country (Hofstede, 1983).

Shackleton and Ali (1990) and Chow et al (1991) support the application of Hofstede’s (1980)
cultural value dimensions because Hofstede’s empirical results have been replicated at the national
level in fifty countries and three regions. On the other hand, unlike Hofstede’s approach,
Kluckhohn and Strodtbeck (1961) value orientations’ approach does not aggregate work
preference across a range of discrete psychological variables (attitudes, work values, sources of
satisfaction). Hence, Kluckhohn and Strodtbeck’s approach is suitable for a study examining job
involvement as an outcome but not appropriate for studies examining work involvement
(Nyambegera et al, 2001). Job involvement is a specific belief regarding an individual worker’s
identification with his or her current job. Work involvement is a construct, which relates to all
employees’ views of work, as it should be or organizational performance. Therefore Hofstede’s
approach as opposed to Kluckhohn and Strodtbeck’s value orientations approach is more suitable
for this paper, which is examining the relationship between culture and strategic human resource
management practices and consequently on work involvement. Triandis (1982) also argues that
Hofstede’s cultural framework has been accepted as important and reasonable for describing


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differences among nations. However, little empirical research has used the Hofstede dimensions to
investigate the effect of culture on SHRM practices, and hence on performance in different cultural
groups (Sondergaard 1994). The cultural dimensions have been grouped into two categories,
namely relations between people and motivational orientations (Hofstede, 2000).

Relations between people
Individualism, versus Collectivism. This is the degree to which individuals are supposed to
look after themselves or remain integrated into groups, usually around the family. Positioning
itself between these poles is a very basic problem all societies face. Individualism and
collectivism have been defined as follows:

“Individualism stands for a society in which the ties between individuals are loose:
Everyone is expected to look after him/herself and her/his immediate family. Collectivism
stands for a society in which people from birth onward are integrated into strong, cohesive
in-groups, which throughout people’s lifetime continue to protect them in exchange for
unquestioning loyalty” (Hofstede, 2002, p 225).

National differences in Individualism are calculated using Individualism Index (IDV) (Hofstede,
1991, p. 53). The highest IDV scores were found in the United States, Australia, and Great
Britain. The lowest IDV scores were found in Guatemala, Ecuador, Panama and East Africa.

Motivational orientation
Societies choose ways to cope with the inherent uncertainty of living. In this category, Hofstede
identifies three dimensions: masculinity versus femininity, amount of uncertainty avoidance, and
power distance.

Masculinity, versus Femininity. Refers to the distribution of emotional roles between the
genders, which is another fundamental problem for any society. The duality of the sexes is a
fundamental fact with which different societies cope in different ways. Surveys on the importance
of work goals show that almost universally women attach more importance to social goals such as
relationships, helping others, and the physical environment, and men attach more importance to
ego goals such as careers and money (Hofstede, 1991). However, Hofstede’s data revealed that


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the importance respondents attached to such “feminine” versus “masculine” work varied across
countries as well as across occupations.

Consequently, masculinity stands for a society in which male gender roles are clearly distinct. Men
are supposed to be assertive, tough, and focused on material success. Women are supposed to be
more modest, tender, and concerned with the quality of life.

Femininity, on the other hand, stands for a society in which gender roles overlap. Both men and
women are supposed to be modest, tender, and concerned with the quality of life. Because the
respondents were mostly men, Hofstede suggested calling this dimension the Masculinity Index
(MAS) (Hofstede, 1991, p. 84). The list of countries in order of MAS (high gender roles
distinction at work) shows Japan at the top. German-speaking countries (Austria, Switzerland, and
Germany) scored high; so did the Caribbean Latin American countries, Venezuela, Mexico,
Colombia, and Italy. The Anglo countries (Ireland, Great Britain, South Africa, the United States,
Australia, New Zealand, and Canada) all scored above average. Asian countries, other than Japan,
were in the middle. The feminine side (low gender roles distinction at work) includes France,
Spain, Salvador, and East Africa among others. At the extreme “feminine” pole were the Nordic
countries including Sweden, Norway, and the Netherlands.

Low MAS countries are characterized by cooperation at work and a good relationship with the
boss, belief in group decisions, promotion by merit, lower job stress, and preference for smaller
companies. Challenge and recognition in jobs, belief in individual decisions, higher job stress, and
preference for large corporations characterize high MAS countries.

Although Hofstede (1980) collected data from MNCs based in fifty countries and three regions, he
did not include some regions, and countries of Central and Eastern Europe. However, his
hypotheses, on countries that were left out, proved right when tested (Bollinger, 1994). For
instance, research (Bollinger, 1994; Elenkov, 1998) supports Hofstede’s predictions that Russian
employees would be characterized by high power distance, high uncertainty avoidance, medium-
range individualism, and low masculinity.

Uncertainty avoidance. Refers to the extent to which a culture programs its members to
feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are


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novel, unknown, surprising, and different from usual. The basic problem involved is the degree to
which a society tries to control the uncontrollable. The countries from Hofstede’s study were each
given a score on Uncertainty Avoidance Index (UAI) (Hofstede, 1991, p. 113). UAI was derived
from country mean scores on questions dealing with rule orientation, employment stability, and
stress. Hofstede’s research has found UAI values for fifty countries and three regions. The
countries rank from Greece, Portugal, Guatemala, and East Africa (highest UAI) to Singapore,
Jamaica, and Denmark (lowest UAI).

Power distance. This is the extent to which the less powerful members of organizations and
institutions accept and expect that power is distributed unequally. The basic problem involved is
the degree of human inequality that underlies the functioning of each particular society. In
Hofstede’s research, power distance is measured in a Power Distance Index (PDI) (Hofstede, 1991,
p. 26). The values and attitudes found at the national level contrast “low-PDI countries” with
“high-PDI countries”, with some countries placed in between. High PDI countries include
Malaysia, Guatemala, Panama, Mexico, and East Africa. Low PDI countries include the US,
Austria, Sweden, and Denmark.

From these results, influence of culture on SHRM practices and work performance of
organizations in Kenya, an East African country, is analyzed. First the implication of globalization
of business is explained. Then, to understand the implications of diversity of cultures within an
organization, basic concept of culture and effect of cultural values on SHRM practices are
discussed.

BUSINESS AND GLOBALIZATION
Globalization of business implies that firms have created international, multinational or global
companies (Hamel et al 1989). As a result, multinational companies (MNCs) now have the chance
to stay competitive. However, the resultant workforces are diverse in interests, backgrounds,
training, and nationalities (De la Torre, 1998). The mosaic of cultural diversity presents a major
challenge both in global and domestic work settings, as there is growing recognition that the skills
and core competencies required by the home company will also be required in the host company
(Tung, 1997).



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The major differentiating factors between countries that have an impact on HRM are contextual.
They include economic, political, legal and historical environments (Begin, 1992; Sundaran and
Black, 1992), employee demographics and labor-market characteristics (Teagarden et al, 1992),
socio-cultural characteristics of the workplace and society (Laurent, 1983; Kim, 1999). A number
of researches on MNCs have indicated that among these elements culture has generated more
interest in the field of comparative HRM because cultures are at the base of people’s behaviors
(Brewster and Hegewisch, 1994; Schuler et al., 1993). It is argued (Sonja and Phillips, 2004) that
employees in an organization live within a larger complex society. Therefore, while members of a
MNC may develop shared sets of assumptions within the organization setting that are special to
that organization and which become that organization’s culture, they also bring with them the
various sets of assumptions they acquire outside of the organization in the form of national
cultures. This theory is supported by Sondergaard (1994) who asserts that national cultures is the
most widely cited feature of countries that creates pressures for decentralization in MNCs to
operate effectively in a particular country.

Research suggests that different cultural identities and values may mediate the way in which
employees within the companies perceive, value, and react to such things as SHRM practices and
how much of themselves they invest in their jobs or the organization itself. MNCs must be
sensitive to the prevailing values and attitudes in that country. For the manager, then, identifying
the existence of cultural values should be an empirical question, not a priori assumption (Pratt and
Rafaeli, 1997).

Effect of Cultural Values on Strategic Human Resource Management Practices
Although a review of previous studies reveals that SHRM has gained popularity, specifically, with
respect to the debate on HRM and performance, the focus has mainly been limited to the linkage
between HR practices and organizational performance. The implication is that SHRM accepts HR
function as an important strategic partner in the formulation of the company’s strategies as well as
in the implementation of those strategies through HR practices. Majority of work in SHRM
(Paauwe and Boselie, 2002; Barney, 1991; Delery, 1998) has adopted the resource-based view
(RBV) perspective, which emphasizes the gaining of competitive advantage by means of
utilization of the resources of the organization through the employees. The RBV theory caused a
change in strategic management thinking from an outside-in approach to an inside-out approach
(Wright et al 2001). It is specifically applied to the field of human resource management because it


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