With increasing levels of globalisation, and the melting of international borders, the issue of cultural differences is assuming greater importance. Managing an international workforce is a part of this challenge. Against this background, the question of the applicability of Western HR management practices in Eastern and developing countries assumes importance. On the one hand, many developing countries' organisations are adopting Western management practices, while on the other, multinational firms are carrying forward their domestic HR practices into the international arena. Both of these raise a number of questions. A study into the applicability of HR practices of the West in Eastern and developing countries is, therefore, of interest to any student of HR management. Some of the important and commonly employed functions of HR management include Human Resources Planning, Job Analysis, Selection and Recruitment, Performance Management, Training & Development, and Employee Relations (McCourt & Eldridge 2003, p.31).
This paper looks at the cultural differences between two sets of countries and their impact on HR practices. Specifically, the paper discusses the differences between the West and Algeria, and takes a brief look at the issue of performance management in Algeria.
Cultural issues in Human Resources Management
As Stone & McCall (2004, p.18) observe, the international operations need to be segmented based on various influencing factors such as language, beliefs and interpersonal relationships. Value systems, and the beliefs that support them, result in the kind of HR climate that an individual or group is comfortable with. Individuals belonging to a certain culture may prefer a collectivist way of working, whereas others may prefer an individualist way of working. (Sparrow, Brewster & Harris 2004, p. 31) The significance of this for HR management across cultures is fairly obvious, and is bound to affect almost every aspect of HR management including recruitment, performance, training and development, and employee relations. Another related issue is the fact that cultures cannot be fitted into stereotypes, and that there can be no a single solution that fits everyone in the particular culture.
Theories of cultural differences
A considerable amount of theoretical work has been undertaken into the question of cultural differences, and these should serve the researcher as a good basis for reference and as a starting point. Two of the most important among these are the works of Hall and Hofstede. According to Hall, cultures can be divided into low context and high context cultures. Low context cultures make less distinction between insider and outsider, and have less affinity to long standing cultural patterns. High context cultures, however, have greater involvement between people, long-standing cultural patterns that are difficult to change, and greater distinction between insider and outsider. (Bradley 2002, p.103; Doole & Lowe, 1999, p.98)
In general Algerian culture is high context, while Western cultures are low context.
Hofstede proposed that there are four dimensions to culture:
- Power Distance;
- Uncertainty Avoidance;
The importance of culture
Employers can no longer impose home grown HR practices on foreign workers operating in a different cultural and national setting. Multinational corporations for example cannot expect that policies that work well in the West, will also work well in other countries. There are many examples to show that workers react differently to a set of practices. A study conducted on people from different backgrounds found, for example, that while workers in the US, Germany and Poland reacted well to empowerment, Indian workers reacted negatively. The extent and nature of empowerment need to be tailored to the background of the workforce. In some cases, certain HR practices that are successful in one country may actually be illegal in some other countries. (Jackson & Schuler, 2003, 72)
Availability of skilled labour is becoming a problem in some of the developed countries because of the changing demographics and aging population. Thus availability of labour, cost considerations, proximity to new markets, and a host of other considerations may drive the move to locate and employ labour from several countries.
The example of E-Funds International, a division of the check printing firm Deluxe, highlights this fact. By locating its operations in New Delhi, E-Funds reduced the number of processing errors by almost 90%, and reduced the turnaround time from five to three days. (Jackson & Schuler, 2003, pp.70-71)
Cultural differences have an effect on every aspect of Human Resources Management, and indeed in every area of management. One of the most critical areas of HR management is performance management.
The ultimate aim of every organisation is to achieve its goals. Achievement of organisational goals is possible only through the efforts of its employees. Organisational performance is viewed as much more than achievement of its financial goals. At the individual level, performance management needs to be in line with the organisational goals, and this could be achieved by various approaches such as the definition of Key Result Areas for individuals, taking into account their role and potential for contribution to the organisational goals.
The first step in achieving the desired level of performance is to set up the goals at the individual level, communicate them to the concerned individual, and measure actual performance against targets and goals. All these processes will be substantially impacted by cultural factors. For example, greater empowerment results in better performance in some cultures while they hamper performance in others. Communicating the goal to the individual may have to be done using methods that are most appropriate to the culture in which such communication is being undertaken. The goals themselves may have to be individual or team based depending on the culture of the workforce, and whether the employees are more comfortable with working as a group or as an individual.
Through performance management system, we can attain six purposes:
- STRATEGIC: Aligning individual goals to corporate goals enforces behaviour consistent with those goals. Sometimes performance management can be used to produce cultural changes.
- ADMINISTRATIVE: Making decisions about the salary, promotion, retention and development of employees.
- COMMUNICATION: Performance management systems communicate expectations and the extent to which these have been fulfilled.
- DEVELOPMENTAL: Using the feedback received from the performance management system, the developmental needs of employees can be identified.
- ORGANISATIONAL MAINTENANCE: Taking stock of the available pool of talent, assessing the interventions needed and evaluating the success of the interventions carried out.
- DOCUMENTATION: The efficacy of tests and other instruments planned can be tested through correlation with the performance management system. (Smither & London, 2009, pp.6-7)
Almost all of the above have a close link with culture. The strategic and developmental purposes can help in changing the culture. Thus if a particular policy needs to be implemented throughout the organisation, but there are cultural barriers to doing so, these dimensions of the performance management system can be used to bring about the necessary change. More important, however, is the need to recognise cultural variations and tailor the actions to suit them, while dealing with almost all of the above purposes. The developmental purpose, for example, cannot be served unless it is suited to the cultural setting in which it is planned. Communication will be ineffective unless the cultural aspects are taken care of. Similarly, documentation, administrative, and organisational maintenance purposes can be best served only if the cultural aspects are considered.
An Algerian company is considered for this case study and its HR policies are analysed, along with a comparison between the Algerian work culture and that of the West. The analysis will focus on performance management. Algeria and the West - A comparison of the cultures
As seen earlier, cultural differences arise from a number of factors. Some of the dimensions that are of relevance are the contextual (High/Low Context) differences and Hofstede's cultural dimensions.
Algeria is generally considered a high context culture, while the vast majority of the West countries are a low context culture. Although Hofstede's study did not include Algeria, most of his dimensions and Hall's context as applicable to Eastern nations are also applicable to Algeria.
Work values and Culture in Algeria
- Individualism: The Algerian culture, as those of most other developing nations, is oriented towards collectivism. This can be traced to Islam and the period before colonialism which influences however, are now on the wane.
- Power distance: Again this is very high in Algeria, particularly at higher levels, although at middle levels it is less pronounced. The Algerians respect authority as well as age.
- Uncertainty avoidance: Although this is hazy area, as there are mixed signals, recent studies are showing that Algeria is moving more towards uncertainty avoidance.
- Masculinity; Algeria does not belong to either of the extremes, and the level of masculinity in Algeria can be described as medium
In addition to the above cultural characteristics, Algeria also has a few characteristics that are derived from its past socialistic pattern of economy and governance. These include
- Policy of employment: Under the strictly socialistic pattern, everyone was provided permanent employment. The trend is now changing and with liberalisation, the concept of contract employment is gaining currency.
- Working conditions and benefits: The effect of pay, benefits and long working hours on motivation and performance among Algerian workers was quite low. However, Algerians living in the Sahara (farthest south) valued this highly, indicating that this is the result of the prevailing economic and political system rather than an innate quality of the Algerians.
It is important, however, to note that many of these values are changing.
Work values and culture in the West
In many respects, work values in the West are the opposite of the above. Some of the West cultural characteristics are discussed below.
- Individualism: Individual achievements are highlighted and rewarded. The implications of this are that selection, rewards and retention will be based purely on the achievement on the job rather than on references.
- Power distance: Power distance is low and subordinates work independently.
- Uncertainty avoidance: Americans and Europeans are willing to take risks.
- Masculinity: This is high in America and Europe, and results in more independent working and assumption of responsibilities. (Jackson 2002, p.63)
Comparison between the two and the implications for HR
It should be remembered that neither of these cultures is intrinsically superior to the other. They are just two different cultures. For example, high individualism and low power distance in the West does not necessarily mean that people are more focused on the jobs and objectively assess performance based on end results alone. However, it does show that they tend to evaluate the performance on what they believe to be job achievements, while a culture with low individualism and high power distance would tend to take into account the references and feedback of others.
Implications for HR and Performance Management
From the above analysis, it is clear that a company operating in Algeria should opt for a system that
- Is oriented towards team working
- Offers benefits that are more in terms of appreciation, recognition or additional responsibilities and power rather than only monetary benefits
- Respects and maintains hierarchies.
- Places as much emphasis on people as on tasks while trying to achieve goals
About the Company
SONATRACH (Société Nationale de Transport et de Commercialisation des Hydrocarbures) is the Algerian state-owned oil and gas company. It has control both direct and indirect over all aspects of the country's hydrocarbons and has guided Algeria toward its present status as the second largest global supplier of liquefied natural gas. It was the fourth largest exporter and producer of gas in the world in 2003. The company hopes to become a major international oil and gas company in the 21st century.
Sonatrach, in its quest to become one of the top oil and gas producers in the world, adopted an aggressive growth campaign in the 1990s. Sonatrach is the largest Algerian company and the 11th largest oil consortium in the world.
Joint ventures were and continue to be among Sonatrach's strategies for diversifying its holdings and expanding internationally.
With operations spanning over 18 countries, it is one of Algerian's culturally diversified companies. The company places great importance on its social and environmental responsibilities. (Sonatrach, la revue, 2009)
Human Resources at SONATRACH
The recruitment policy of the company is to be an equal and non-discriminating employer, and to protect their interests and encourage creativity. The company has a policy of providing training facilities to secure the professional development of the employees. For this purpose, the company operates training and remote education networks that are designed to provide lifelong education to employees.
The training effort is oriented towards enhancing the managerial and innovative capabilities at higher levels, and improvement of skills at the operational levels. In addition, people who have international dealings or are posted abroad are imparted language skills and cross-cultural training.
Being keenly aware of the compulsions arising from its international exposure, the company has a policy of developing a diversified workforce, and adopting internationally accepted Human Resources policies. (Sonatrach, Rapport Annuel, 2008)
Analysis of the policies in the light of the cultural paradigms
The HR policies of Sonatrach are in keeping with the cultural characteristics discussed above. The emphasis is on training and development of the individuals more than on pay and benefits. From the company's statements, one can also see that the focus is more on group working rather than on discovering or nurturing individual excellence. The company has a well established structure that is respected in all dealings.
At the same time, the company has been adopting international practices, and trying to inculcate a spirit of achievement and adoption of the good aspects of Human Resources Management practiced in the West, particularly in the light of its international operations.
Applicability of HR practices of the West to emerging economies
Although several cultural differences exist between the West and many of the developing countries and emerging economies, the world is fast becoming a single unit. Both the developed and the developing countries are undergoing changes in their attitudes, perspectives and approaches.
Many of the traditional values and beliefs in Algeria are undergoing changes, and the focus is clearly shifting towards obtaining results. This is true not only of Algeria but of most of the developing world. At the same time, some of the Western beliefs are also undergoing changes partly in recognition of the advantages that are to be gained, and partly because of the compulsions imposed by globalisation.
Against this background, it is becoming increasingly clear that the practices of the west are not only applicable to these countries but are also fast becoming essential. With both sides recognising these changes and compulsions, it is no longer a question of whether western concepts are applicable to emerging economies. The emerging trend seems to be to evolve a common set of HR practices imbibing that which is good in both cultures.
HR Management practices need to be tempered in the light of the cultural values and beliefs of the environment in which they are being implemented. While this is true of all aspects of HR management, they are particularly relevant to the commonly practiced and critical HR initiatives such as performance management, training and development, and recruitment and selection.
Cultural differences between the west and emerging economies lie in the focus areas and individual responsibilities. While western countries are more individualistic and task oriented, Asian countries and most developing nations give importance to people, and are more oriented towards collective responsibility.
A look into the performance management and training practices in an Algerian company reveals that while these are being adapted to suit the cultural milieu in which the policies are being implemented, the culture itself is undergoing changes, and practices are being fine-tuned to suit the international nature of operations. It appears likely that in future organisations will be oriented towards a single unified global culture and organisational practices rather than being divided into western and eastern stereotypes.