Business Culture - Notion and Background

First, it is important to put an emphasis on the fact that the importance of the relationships between business and culture is a disputable and discussed theme among the scholars. Schein pays additional attention to the fact that the theme of business culture is studied in the scopes of the following sciences: sociology, social psychology, cognitive psychology and anthropology.

Now, there is a scientific trend of separation  business culture as an independent science, which covers the following aspects: cultural studies, cultural variations among the nations, impact of the religion on the cultural specific formation, impact of mass media, of social classes etc. One more feature of the business culture formation is the impact of the globalization process on the formation and development of international cultural relations and on the new trends occurring in the cross - cultural relations.

Edgar Henry Schein (2010) puts an emphasis on the fact that currently, there is such a trend, which implies the drive to a certain type of culture- having it, being a part of it and managing it. That is why the majority of scientific researches and practical recommendations are dedicated to this trend investigation and to development of new approaches, useful for the top managers of organizations (Schein 2010, pp. x-xi).

In addition, in the preface to the fourth edition of “Organizational Culture and Leadership”, Edgar Henry Schein has put an emphasis to the fact that now, in the world of new technological achievements and globalization of the business, the notions of business culture have become a complicated theme for the investigation. The main reason for that is the fact of the new technological tools explosion in the areas of media transmission and informational technology practical implementation (Godley1996, p.2).

Andrew Godley (1996), in the scopes of the business culture origin`s discussion, relies to the sociological and economical history findings of Weber and Tawney and on the relationships between the religion and origins of capitalism, in particular. Over the last decade, the unifying roots of these relationships have been additionally investigated, and as a result, the impact of the social and cultural background for the economical system has been considered in the light of the enterprise “sources”. In Great Britain, this interest has been mainly associated with the “Thatcherism”. This approach has contributed to the movement from the state - managed cooperation and planning to the greater individualism and competition. 

At the same time, it is important to pay additional attention to the fact that Godley states that the approach towards national cultural traditions, which emerge in the business entities, may be considered as the fashionable approach towards understanding and managing their individual performance. Even while taking in account the fact that apprehensive academics have developed the approach of ‘quick fix’ towards the complex of the organizational problems, the term “business culture” has been introduced into the everyday discussion of top management and administration of many global companies. It is important to pay additional attention to the fact that in the scopes of international relations, the urgency of business cultures’ impact on the quality of relations is an evident fact.

While referring to historical background of the business culture notion, it is possible to see that in the 1960-s the movement from the “classical ”, formal and structural approach towards business culture, which implied the bureaucratic control from the top, has been shifted to the new approach, which has been mainly directed to the informal sociology of organizations. In addition, this new approach implied consideration of culture as an important tool of competitive advantage establishment, both in the scopes of nations and in the scopes of a particular business industry.

The first successful practical implementation of such an approach has taken its place in Japan and in other Asian countries, which have based their approach towards the collaboration with foreign countries on the setoff differences in cultural and religion traditions, which might have had their impact on business. In addition, cultural considerations, in the light of doing business, have assisted the top management of the Japanese and other Asian business entities in understanding the economical competitiveness and in prescribing the policies of its improvement.

Initially, there were two forms of interest in culture and business. In Britain, the “enterprise culture” has been discussed due to the obvious political reasons, on the micro level. In US, it has been investigated in the scopes of a particular enterprise or business entity. The target audience of the majority of scientific works was the top management of companies, that is why these research works and recommendations were directed for the practical implementation, and they were represented in an evangelistic form. At the same time, there were such research works, which had a solid academic foundation.

The core contribution of the current scientific approaches, developed in the area of economics and sociology, implied the analysis of the way, in which the cultural values affect the business performance. The evident practical examples support these theoretical findings..

While taking into account the sociology, it is important to say that the MarkGranovetterSchool of economical sociology issued the most notable development..  The core challenge of these scientific researches has been development of the core assumptions, concerning the conventional economics. These assumptions were focused on the ways of interrelation between the economic actions and institutions (such as market) with the core cultural values of the social groups.

In economical studies, there were the sub disciplines (such as transaction cost economics, new industrial economics, new institutional economics), which have investigated the aspect of the national behaviour`s specific impact on the economical outcomes.

While taking into account the cross-cultural studies, it is possible to see that their rapid development has also taken its place in the timeframe of the last thirty years. Before the 1980-s, this subject has not been deeply investigated by the scholars. The core contribution in the area is the scientific direction development by André Laurent and Geert Hofstede. They have transformed the subject of business culture by showing the evidence of the natural cultural differences, which vary among the countries. In addition, these scholars have proved the impact of the cultural differences on the main organizational variables and on the informational flow specific.

The core bases for these studies are in the area of social psychology, but not normally in the accessible area for business historians. Now, the cross-cultural studies have grown in sophistication and, as a result, they have matured to the sub disciplines of the sociology. As a result, the organizational sociologists and business economists carry out the practical application of the cross-cultural aspects to the international business relations.  Recently, the importance and urgency of such an approach increases rapidly (Godley1996, pp. 1-3).

Charles Mitchells’ (2000) approach towards business culture can be represented in the following manner. First of all, author puts an emphasis on the fact that every manager, who makes a decision of running the global (or at least international) business, faces the set of problems, implying language and cultural barriers; these barriers cover both collaboration with the foreign partners and meeting the requirements and satisfying the demand of foreign consumers or clients. Initially, time and distance were considered as the barrier in doing business internationally. Recently, with the availability of the set of transportation means and with the international communication means -such as internet and phone, these barriers have been almost managed or, at least, simplified.

That is why, now, the main barrier for the international business is the cultural aspects in communication. Now, the businesspersons have faced the problem of communication, since there are many international business-cultural differences, different traditions and customs, which vary among the countries, multicultural environments and finally the language barriers.

While taking into consideration the practice of international relations, it is possible to make a conclusion that majority of managers, who are running their businesses in international scopes, cannot give the integrated and complete definition of culture and of business culture in particular, but Charles Mitchell (2000) considers that they understand this term on a subliminal level.  The core objective of being an expert in the business culture is getting an acceptance from the foreign partner and, as a result, winning the competition in a particular area (Mitchell 2000, pp. 2-6).

Charles Mitchell has considered the importance of the business culture for the business in the following manner. First, the statement of Benjamin Franklin, “time is money”, gives a partial hint for this issue clarifying. Now, those businesspersons, who are trotting their business globally, consider that one more aspect of making big money globally is to understand the cultural differences and to be sensitive to these differences. That is why if there is a failure is grasping the subtleties, implied by such public actions as greeting rituals and seating arrangements, practical application of the etiquette and being dressed appropriately for a particular country, it will make the impact on the effectiveness and success of the particular business transaction.

In addition, both personal and business interactions between business partners are affected by the culture. Other aspects are the management style, marketing strategy and organizational structure of the business entity, which are also mainly influenced both by the personal culture of the top manager and by the national culture of the particular country.  It is obvious that the national culture influences the corporate culture of each particular organization..

The next important issue, outlined by Charles Mitchell, and which should be discussed in the scopes of this chapter, is the fact that the culture is such a phenomenon, which makes the Japanese to be Japanese, Brazilians - Brazilian and Germans - German (Mitchell 2000, p.4).

Charles Mitchell provides the more formal definition of culture. He considers it as the set of values, standards and knowledge, moral codes, religion, language, customs, which are shared by the representatives of a particular social group (nation) and are reflected in actions. In the light of business culture, it is possible to apply this notion as the set of factors (religion, customs, traditions and management style), which may have the impact on the business. Both social and business culture passes from one generation to another with all its aspects (customs, religion, language, etiquette, moral code, ethics etc). All these aspects are interrelated and the common view of authority, inherent to the particular society, moral code, approach towards doing business, towards carrying out the negotiation process etc. are represented by the business culture of a particular social group (Mitchell 2000, p.4).

According to Geert Hofstede (1996), the Dutch scholar in the area of organizational studies and organizational culture in particular, culture is “the software of the mind”. In other words, the culture is such a type of social programming, which runs our way of thinking, acting and perceiving ourselves. Author considers the human brain as the hardware for the cultural programming. That is why it is possible to make a conclusion that the culture is not innate for human being. Consequently, the gene of American individualism or of German rigid order does not exist.

In addition, it is important to stress the fact that initial culture of the individual is superior, hence there is a possibility of acting like an American or Russian while being German, but such a behavior would be the result of a durable cultural adaptation. In the multicultural environment, the best possible solution for the cross-cultural barrier managing is practical application of the “adapt or die” philosophy Hofstede (1996) has considered the culture as the “collective programming of the mind which distinguishes the members of one human group from another”.

Hofstede has identified five values, which occur in different degrees in a particular country. These values are the following: individualism, masculinity, power distance, uncertainty avoidance, and long-term orientation (Nakata 2009, p.3).

Mark Casson (1994) has investigated the effect of the economy on the business culture in the light of loyalty, dedication and honesty. Author considers that the costs transactions are reduced by the strong culture and, in addition, the quality of the culture affects directly the success of a particular economical system (Casson 1994, p. 18).

Ulrike Ditzel (2007) compares the culture with the construct of iceberg. In other words, the only few aspects of culture are evident, as the top of an iceberg. These aspects are language, customs and clothes. That invisible part of the iceberg (in the light of business culture) implies the elements, which require deep investigation for compete understanding of the cultural environment of a particular social group (country) (Ditzel 2007, pp. 3-8).

After deep investigation of the set of existing definitions of business culture, it is possible to develop the integrated version.

Business culture is the set of moral, ethical and cultural standards, followed by the representatives of a particular social group or nation and transferred from one generation to another. Business culture may be represented in the legislative acts, in ethics of business communications, in etiquette norms and in subliminal interrelations between people in the business world.

The next issue to be discussed in the scopes of this section is the theoretical constraints of culture. One of the most important questions, discussed by the scholars, is the background of different behaviours among the nations. In other worlds, the question is why the Germans act not in the same way as the Japanese or Americans do.

Several models have been developed by the scientists for clarifying the question, concerning the core reason of doing the same things in a different manner by the representatives of different countries or nations.

It is obvious that it is not possible to construct the complete model for clarifying this issue. At the same time, the core objective of these models is providing the people who  run business globally with a possibility of not only learning the cultural traditions of their potential business partners, but also to assist them in understanding the background of the differences in behaviour, and, as a result, the background of a particular actions. Geert Hofstede and Edwards Hall developed the two most commonly applied models of business culture understanding in the cross-cultural aspect.. These models allow carrying out the comparison between the behaviours of representatives of different social groups (Ditzel 2007, p. 10).

As stated above, Hofstede has outlined four dimensions of culture (model of understanding the cultural differences) : individualism vs. collectivism, power distance, uncertainty avoidance and masculinity vs. femininity.

While taking into account the individualism vs. collectivism dimension, Geert Hofstede has considered that in the countries with the individualistic lifestyle, there is a trend of self-protection and self-care (including care of own family), rather than taking care of the society. Freedom and personal time are the core values in such a society. In addition, the core emphasis is put on the achievement of social and economical goals rather than on the group goals` achievement, and every single person is appreciated in such a social group. While comparing the collective trend in social group with the individualistic one, it is possible to say that integration of people into the strong and powerful groups is the key feature of such social groups. In addition, the core value of people is reaching the general, group goal and, as a result, social life improvement.

While taking into account the power distance dimension, it is possible to say that it represents the role of culture in an unequal power distribution in a particular social group. In the cases when the society has the minimal power distance, the hierarchical structures and social classes are rejected. In the case of high power distance, different classes are accepted and appreciated.

The uncertainty avoidance dimension implies the role of culture in the uncertain situations` resolution and problems solving. In order to avoid the problem situations (in business world in particular), the set of cultural regulations is developed by each society individually.

The last dimension, outlined by Hofstede, is the Masculinity vs. Femininity. The core values of a masculine culture are usually competition, success and materialism. The representatives of such a culture are career-oriented people. In the case of feminine society, the core values are the social wellbeing and welfare of citizens.

Dennis Henners (2007) has outlined the fifth dimension - analyzed specifics vs. integrated wholes (Henners 2007, p. 13).

To conclude the chapter, it is important to stress the fact that knowledge of the business culture is one of the key success factors in the nowadays-competitive world. The core reason for such a trend is that the main barrier between the foreign partners implies not the transportation and communication means and tools, but the interpersonal communication of the business partners, which should be based on the knowledge of the moral principles, businesses trends and the cultural traditions of the business partners’ country (Henners 2007, p. 15).

Currently, scholars consider culture as the economic asset (Godley 1996, p. 48) because this factor has to be taken into account by economists more seriously than it used to be 20 years ago. Godley states that the culture itself can`t be outlined as the exogenous factor, which makes its impact on formation of a particular primitive social group only. More than that, this notion can`t be considered as the empirical research residential factor. Godley states that the best and most effective approach towards role of the culture in the economical, business and social life development is its understanding as the positive factor, which makes its impact on the growth of advanced economies` promotion.

In the case if the culture is considered and practically applied as the valuable and invisible source, occurs the importance not only of measuring the benefits, but also of carrying out the comparison analysis of these benefits with the sustaining culture and acquiring of costs.  The significant impact of the business culture on the multinational companies is also supported by the Johanna Schöberl`s research findings  (Schöberl 2007, p. 16).

One of the practical applications of culture is taking it into account as the factor of the human capital. Its role and, consequently, importance in such a case influences the national productivity, making the positive impact on the comparative advantage winning. As an example, it is possible to consider the higher productivity of workers with the similar skills in one country in comparison with the effectiveness of the similar activities carried out in another country. The core reason for such a trend is the local environment of a particular country, which create the better motivation for some particular actions, while encouraging some particular skills.

Godley (1996) and Hannah Rachel Bell (1998) have outlined one more manifestation of the cultural difference, which implies the successful exploitation of the interim networks, which develop the infrastructure by coordination of the product flow.  At the same time, while running business in other regions, which have different cultural traditions, the cross-cultural conflicts between different factions occur (Bell 1998, p.25).

It is obvious that the similar relations may occur between the spontaneous cooperation and factional rivalry in the scopes of the industrial relations, at the national relations` level and in such an area as the industrial policy. That is why, the importance of business culture for the effective business performance is an obvious fact both for the nowadays managers (practical application) and for the scholars of different areas, such as business ethics cross-cultural relations, social psychology etc. (theoretical investigation of the problem and its solution development) (Godley 1996, p. 4).

Hannah Rachel Bell states that the importance of the business culture for the business world may be represented in the form of the cultural competence. This notion refers to the ability of carrying out the effective interaction with  the representatives of other cultural environments or nations. Such an interrelation is carried out mainly in such an area of business world as human resources. In addition, the cultural competence is important for people, employed in the non-profit organizations or in the governmental structures, which in turn, collaborate with the representatives of different social or cultural groups and nations.

Mercedes Martin & Billy Vaughn outline the four components of the cultural awareness (Martin 2007 pp. 31-36): awareness of own cultural worldview, knowledge of different cultures, personal attitude towards cultural differences and the cross-cultural interrelations` skills.

It is obvious that the development of the competence in the cross-cultural aspects understanding, results to the effective interaction with the representatives of different cultural environments in the light of business collaboration. This issue, in turn, provides the culturally aware person with the competitive advantage in a particular industry and in a particular situation. From the other hand, cultural incompetence in the business worlds may lead to the following outcomes: damaging of an individual`s career and self-esteem and damaging the image of the entire organization.

It is important to pay additional attention to the fact that in majority of the cultural competence definitions, scholars put an emphasis on its role for the business interaction with the representatives of different countries and cultural environments. At the same time, other scholars put an emphasis on the attitude. Only a little group of scholars consider the cultural competence in the area of business and in the light of a particular organization.

Paul Pedersen (1999) outlined the following components of the cultural competence: awareness, knowledge and skills  (Pedersen 1999, p. 34); the Diversity Training University International (DTUI) has outlined the fourth component of the cultural awareness - attitude (Illig 2010, p. 1)

While taking into consideration the cultural awareness, it is possible to make a conclusion that it is the way in which human being follows the personal reactions of the people, who have different cultural traditions and represent another social group or nation.

The attitude component, which has been added by the DTUI emphasizes the different features that exist between the training that increases  awareness of cultural bias and beliefs in general and training when the participants have to carefully examine their own beliefs about cultural differences.  In addition, this component has been individually separated in order to provide the participants of the cross-cultural interrelation with the possibility of understanding their own inner world and to clarify the own attitude towards the representatives of different social groups.

While taking into account the knowledge component, it is important to pay additional attention to the fact that Paul Pedersen (1999) was tending to indicate the fact that the social beliefs and values, concerning human equality were not always the consistent with the human behaviour. The author puts an emphasis on the fact that in the majority of cases people ironically are not aware of such a principle.

Patricia Devine (2007), the social psychologist, has proved that those people, who get a low score on a prejudice test, tend to use the exemplify prejudice in cross-cultural interrelations. As an example, Devine considers the out-dated such labels as, for example, "illegal aliens" or "coloured" (Martin 2007, pp. 31-36).That is why it is possible to make a conclusion about the importance of knowledge component in the development of the cultural competence and, consequently, in business relations in the cross-cultural environment or team.

That is why in order to improve the cross-cultural competence, the evaluation of the personal attitude towards cultural differences and its impact on the individual`s personal behaviour  has to be carried out. Consequently, the integrative and common goal of the diversity professionally implies the creation of the inclusive systems, allowing members of the cross-cultural team or environment to achieve the maximum productivity levels.

The skills, as the component of the cultural competence, focus on the practicing of cultural competence in order to achieve the perfect level in the cross-cultural communication. It is obvious that the communication is a fundamental tool of interacting in the organizations of both domestic and international levels. It is important to put an emphasis on the fact that the other types of non-verbal communication, for example, gestures are also considered the part of communicative process and should be polished. These aspects of communication vary in different cultures, and that is why skills in this area require additional knowledge of the specific cultural environment (Nine-Curt 1984, p. 56).

It is possible to make a conclusion that the set of four key components of the cultural competence is present in every definition of cultural competence, and that issue, in turn, can be considered as an integrative feature for the popular definitions. At the same time, it is important to emphasize  the fact that the practical importance of the definition goes beyond the integration of previous definitions.  The importance of cultural competence in the area of business culture is an evident fact in the current business world, which requires constant interrelation on the cross-cultural level.

The next factor of the business culture importance for the nowadays business is the 3Rs model: recognition, respect and reconciliation. In order to clarity the approach, developed by Fons Trompenaars, PhD, and Peter Woolliams, it is important to outline three R’s in the light of the authors’ approach.

Taking into account recognition, authors have paid additional attention to the fact that while the overt cultural (value) differences may be easily recognized, there is a probability of being unaware of the hidden implicit differences. That is why the reason of the cultural due-diligence in the agenda of the majority of the classic HR models absence becomes obvious. Even while taking into account the fact that the first step implies the existence of the differences in values, it is also important to take into consideration that the meaning, given to the same thing by different people, is also different, especially in the cases when those people are the representatives of different social groups or nations.

Taking into account the respect as the component of the business culture, it is important to reply to the fact, outlined by Trompenaars and Woolliams and related to the different orientations, concerning 'where am I coming from'. The authors put an emphasis on the fact that this issue does not imply ‘right or wrong', it just implies the difference. It is obvious that people tend to judge about the cultural difference of other people, while putting the own culture as the basic one.

In order to be successful in the business world, while working internationally, and to represent the highest level of cultural competence, it is important to represent the respectful attitude towards these differences, and to accept the individuals` right of interpretation of the world, in the scopes of the business products, services, relations with the clients, colleagues and business partners..

The last component of the business culture is the reconciliation. Authors consider the core reasons of cross-cultural misunderstandings as the different worldviews, and consequently, the tensions, which are the derivatives of these different systems of values and/or the idealised behaviours vs. current practice. In such case, the core task of the HR management is facilitation of the reconciliation between these opposing differences in order to develop the wider reconciling organisation (Trompenaars 2010, p. 2).

Creainer and Dearlove (2004) state that the importance of recognition, respect, and reconciliation can be represented in the following form. First, the core task for the Human Resources management is assisting the players in recognition of the fact that the cultural differences make their impact on the organizational life of the business entity.

Secondly, the members of organization should be provided with the evidence of the fact that the different cultural orientations and approaches can`t be considered in the light whether they are wrong or right, because they are simply different.

The last task of the human resource management of a particular business entity is demonstration of the fact that the wealth is mainly created in collaboration of different companies, located worldwide or in alliances. In addition, in such case the reconciling of the values is required. The practical implementation of the 3Rs theory makes the positive impact on the merges in business and on the process of carrying out the debates in alliances. That is why the cultural due diligence is the tool for the seemingly opposite views of reconciliation (Crainer 2007, p. 726), (Brown et all, 2002, p. 283).

Fons Trompenaars (2004) and Peter Woolliam (2004) have developed the Cultural Due Diligence, the new methodology, mainly based on the extensive experience of the business entities, which are working in the alliances. This issue, in turn, assists in the operational framework, providing the help in reaching the consequences in the corporate work (cross-cultural aspect).

The core purpose of such an approach is getting the additional benefit from the alliances as the form of collaboration. The authors have based the Cultural Due Diligence approach on the three R’s : recognition, respect and reconciliation (Trompenaars 2004, p. 105) .

Fons Trompenaars, PhD, and Peter Woolliams, PhD, consider that in the curbed business world, characterized as the globalised one, the new approach towards HR should be developed and based on the three R’s. That issue, in turn, proves that business culture plays the significant role for the success in a particular organization. All the business entities need both the constant and changeable approach, practical implementation of innovations and keeping the traditions, serving both for public and for private interest,  applying both planning and laissez-fair,  keeping order and providing the employees with the freedom of making creative decisions.

In order to develop the consequence for the above listed issues, authors consider the HR as the key success factor in changing the business world and managing the dilemmas which are mainly created by recognition, respect and reconciliation.

The next issue to be discussed in the scopes of this section implies the practical application of the business culture and its core aspects in the nowadays business world.

Ann Marie Sabath (2010) emphasizes the fact that with the rapid development of the new technologies and their practical application in business world, there is a need for additional attention to the business culture, its practical application, development and improvement. Author has carried out the comparison analysis of the scopes of practical application of the electronic and wireless communication technology in the business settings in 1998 and in 2010. If ten years ago such tools of communication as e-mail, Skype, cell phone, fax etc. were occasional in the offices, now they are the essential part  of doing business.

Previously, e-mail was checked once or twice a day and now, the middle-level manager spends the majority of day communicating via e-mail. Consequently, it is possible to see that currently the electronic means of communication have replaced the written communication. Taking into account the voice mail systems, initially attached to the office and home phones and served as a backup means of communication, currently they are attached to the cell phones and are considered as the main tool of communication with clients, customers, business partners and colleagues.

That is why the need for the business culture transformation has occurred and the competence in the area of the business culture has become the key success factor of winning the competition, while the eye-to-eye contacts and personal meetings have been reduced to the minimum due to the convenience and availability of the electronic means of communication.

In addition, the author has outlined the main negative impact of the mass application of the electronic means of communication. Because the number of the face-to -face contacts has been reduced, the “mingle phobia” (apprehension of communication with business partners in informal social settings) has occurred.

At the same time, the importance of business culture competence is an urgent question for the people who carry out the business travels abroad and who need to be sensitive to the cultural differences of another countries and to be able to apply these knowledge into the practice successfully (Sabath 2010, pp. 11-12).