Managing change across borders

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Managing change across borders

Case of Vitens-Evides International

By: Marjolein Inklaar University of Groningen Faculty of Economics and Business MSc International Business and Management May 2011 Sumatralaan 42 9715 GG Groningen m.e.inklaar@student.rug.nl 06 14842374 Student number S1458620

Abstract

One of the many challenges companies face when managing change abroad is the difference in culture. Little attention has been paid to the influence of cultural differences on the change process. In this explorative study Kotter’s model of change management and Hofstede’s framework of cultural dimensions are used to predict the influence of culture on the process of change.

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1. Introduction

‘Panta rhei kai ouden menei’ is a famous thought by the ancient Greek philosopher Heraclitus and later adopted by Plato. It means, everything flows and nothing remains to be the same. The thought of Heraclitus was that everything in this world is constantly changing. This idea is still very much considered true by scientists today. The subject of change management has received increasing attention in research (Kotter and Schlesinger 1979, Lewin 1951, Weick and Quinn 1999, Kotter 1995, Alas 2007, Kotter 1995, etc.). Besides this interest in the changing organization, the internationalisation of organizations has increased rapidly over the past decades as can be seen from the interest in internationalisation in recent literature (Susman 2007, Zaidman and Brock 2009, Hofstede and Hofstede 2005, Gupta and Govindarajan 2000, De Long and Fahey 2000, etc.). The combination between these two, change processes in a culture other than the organization’s home country is extremely complex, because change processes are strongly affected by culture. Therefore this paper will focus on change processes in a culture, other than an organization’s own culture. Change Management

Change Management is concerned with the process of going from a current state to a desired future state. In 1973 The Conference Board1 asked 13 eminent authorities to speculate what significant management issues and problems would develop over the next 20 years. One of the strongest themes that run through their subsequent reports is a concern for the ability of organizations to respond to environmental change. As one person wrote: “It follows that acceleration in the rate of change will result in an increasing need for reorganization”. When considering the enormous amounts of academic research that has been done in this field and the focus of businesses on change and change management shows that this prediction, made in 1973, came true. Now the words: “The only constant is change” are often heard in organizations (Fleming, 2007).

Effective organizational changes are rare, recent statistics show that only one-third of the changes were considered successful and the executives devoted an average of six months planning the transformations (Armenakis & Harris, 2009). Most change efforts encounter problems; they often take longer than expected and desired; they sometimes kill morale and they often cost a great deal in terms of managerial time or emotional upheaval. Reorganization is often deferred, with a resulting loss in effectiveness and an increase in costs (Kotter and Schlesinger, 1979). Quite a few organizations have not even tried to initiate needed changes because the managers involved were afraid that they were simply incapable of successfully implementing them (Kotter and Schlesinger, 1979).

Change is inescapable for business managers; it is an unavoidable part of life as described by Heraclitus and an inevitable part of business as shown by The Conference Board, Fleming and Kotter. Change is very much a part of managing businesses, even if change can be tricky, difficult and with unsure outcomes.

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Guiding the process of change and factors for success

Numerous researchers investigated in what way change processes can be guided. Kurt Lewin is one of the founding fathers of modern change management seeing it as a process of unfreezing, changing and refreezing (Lewin, 1951). This idea of the change process has evolved and elaborated over the years in the work many researchers (Kotter and Schlesinger, 1979), Weick & Quinn (1999)). Alas (2007) proposed a triangular model, and not so much a step-by-step model, where she considers the scope of change, the duration of change and the initiator of change.

Furthermore researchers have considered the success factors of change, among these are Oakland and Tanner (2007) who defined two main constructs of change management: Readiness for change and implementing change. Whereas Kotter (1995) when considering at each step in the process of change also considers why the leaders of change either fail or succeed.

So these topics with regard to change management have been covered by current literature. However, seeing that businesses are becoming increasingly international, there is a need for considering international change management.

International Management

Internationalization in business has been viewed as the process of increasing involvement in international markets (Susman, 2007). The functioning of a multinational relies on for instance intercultural communication and cooperation (Hofstede & Hofstede, 2005).

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guarantee success in an unfamiliar context. He states that the prime object of the relationship is doing business with each other and “really successful international business people have an ability to migrate between cultures, finding common ground”. It stands to reason that finding common ground and moving beyond cultural differences is important, this can, however, be a very difficult process. Until this point is reached, however, it is imaginable that cultural differences influence and possibly deter the process of international change in businesses.

One of the few works that considers the influence of cultural values on the change management process was done by Head et. al (1993). They developed an organizational transformation project to be compatible with the Danish value system. In their investigation they used the cultural dimensions developed by Hofstede (masculinity, uncertainty avoidance, individualism, and power distance) to shape the change process to the cultural values of the Danish.

Research Question

To summarize, much research has been done on the processes of change, how these can be best guided, as well as factors of success for managing change processes. Also research has been done on the influence of cultural differences on management practices. Furthermore, on a small scale research has been done on how cultural values can shape a change management process. However, in this research Head et. al (1993) considered how a change program could be compatible with one other value system. This paper will consider whether it is possible to use cultural values to help predict the way change processes are managed in a country different than a company’s homeland. The company, from which the case studies are used in this research, is a Dutch drinking-water company working together with local companies and governments in developing countries to improve their water delivery and systems. So the focus of this research will be on a utility company, originating from the Netherlands, working in developing countries on change management processes.

This leads to the following research question:

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2. Structure of this paper

In order to answer the main research question several steps need to be taken. Step 1 – Literature review

This step has as the purpose to be able to develop hypotheses with regard to the effect of culture on the process of change by considering the literature on the following topics, which will be explained in more detail below:

• Change Management Processes – Models

• Factors of success in change management

• The influence of cultural values on international (change) management

Change Management Processes – Models

There are numerous models that provide more insight in how to change organizations. Burke has identified several ways in which models can be useful (Palmer, Dunford, & Akin, 2006):

• It makes the complexity of situations where a lot of things are going on more manageable by reducing that situation to a manageable number of categories (abstraction).

• It helps identify aspects of an organization’s activities or properties that are in most need of attention.

• It helps highlight how various organizational properties are interconnected

• It provides a common ‘language’ with which to discuss organizational characteristics

• It can provide a guide to the sequence of actions to take in a change situation.

In essence a model helps to ‘get a handle’ on the complex reality that is an organization (Hornstein, 2001). Therefore several models created by researchers will be considered and one of the most used and applicable one will be used for the remainder of this research as a guideline as to how a change process can take shape, in order to assess the predictability of cultural values on the process of change. In choosing the framework it will be important to consider what type is likely to be used when managing change abroad. The framework that will be used in this research is the one in which the influence of culture on every different step of the change process can best be contrived. So how can change processes be structured in order to identify the influence of different aspects (in this research: culture) on each step of the process?

Factors of success in change management

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The influence of cultural values on international (change) management

In order to find out in what way cultural values could influence the process of change it is important to select a framework for this, to be able to assess the complexity that culture is. It is needed to have a model to make sense of culture. Cultural dimensions can be used to explain people’s values and reactions.

Step 2 – Hypotheses

After choosing the framework used for considering the change process it is needed to consider every step of this process and establish what every step is meant to do in order to assess the expected influence of culture on the different steps taken in a change process. After which hypotheses with regard to expected influence of culture on these different steps of the change process can take shape.

Step 3 – Case study and data collection

In order to investigate the value of these hypotheses to consider the influence of cultural values on the steps of a change process a case study will be conducted, or to be exact, five case studies emanating from one company. A case study is a research strategy which focuses on understanding the dynamics and complexity present within single settings (Eisenhardt, 1989). This means that, in this research, which is exploratory in nature, the aim is to determine whether the hypotheses hold any value, before a lot of money is used to investigate more quantitatively and test the hypotheses. Since little research has been done in this area, it is useful to first determine whether it is worth doing large-scale quantitative research.

Little research has been done in the field of the influence of cultural differences on the process of change in combination with utility companies active in developing countries. For this the case of VEI (Vitens Evides International) will be used. VEI has projects abroad in the following five countries: Ghana, Malawi, Mongolia, Vietnam and Mozambique. VEI has been asked in these countries (by government or local water suppliers) to work together with the local organizations to improve e.g. logistics and water delivery. So a process of change was (and mostly is) required in these countries, while working together with the local population with their own cultural values (different from the home country of VEI, which is The Netherlands).

First a closer look will be taken at the different projects of VEI to see what the process of change looks like at each of these projects. Since the influence can be different in each project of VEI (due to the fact that they are in different countries) it is necessary to shortly introduce these different projects of VEI.

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3. Literature Review

3.1 How to manage change – models of change

Change management is an issue that has been covered by many different authors, from different viewpoints and angles. In this section will consider how various authors suggest change should be managed by companies. Many of these authors advocate some type of model, or step-by-step process that a change process could look like. The reason models are used they:

• reduce a situation that can be very complex to a more manageable size.

• help to identify which aspects of an organization’s activities or properties are those most needing attention.

• can highlight the way various organizational properties are connected

• provide a common ‘language’ with which to discuss organizational characteristics and

• can provide a guide to the sequence of actions to take in a change situation (Palmer, Dunford and Akin, 2006).

There are numerous change models, too many to discuss here. I will set out two of the often cited ones. The reason these models were picked is that many other models build upon the framework set out by Kurt Lewin, which will be discussed first. The model from Kotter (1995) builds on Lewin’s model, which is still current today, despite it being created 60 years ago, and used in literature and business.

Kurt Lewin – Freeze Phases Model

One of the forefathers of modern change management is Kurt Lewin (Lewin's freeze phases), he established the following model in the early 20th century, with regard to change management (figure 1). His ideas are nevertheless current today and are still being used, for example by Weick and Quinn (1999).

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The main elements of this model are:

Unfreeze – People have a basic tendency to seek a context in which they have relative safety and

feel a sense of control. In establishing themselves, they attach their sense of identity to their environment. This creates comfort and anything that means a change in this safe environment is seen as causing discomfort. Lewin calls this the frozen state, and to be able to get people moving they have to ‘unfreeze’. “What appears to be needed to encourage people to accept change is by unfreezing the organization, by disconfirming, and creating anxiety.” (Schein, 1993).

Move – Change is a journey, rather than a simple step and a person may need to go through several stages of (mis)understanding before getting to the other side. Managers sometimes think that when they spend months on their own journey, everyone else can do it in a single jump. Transition requires time. In this phase counselling and other psychological support will be helpful. The first step of moving can be very scary. When someone is ‘change ready’, they are unfrozen and ready to take the next step. Some people are more ready for change whilst others take a long time to let go of their comfortable current realities.

Refreeze – At the end of the journey people need to ‘put down their roots again’ and establish a new

place of stability. However, in modern organizations the next change may be lurking around the corner, so often a stage of ‘slushiness’ is encouraged, where freezing is never really achieved. The danger in this is that people fall into a state of change shock. They work at a low level of efficiency and effectiveness as they await the next change. “It’s not worth it” is a common phrase when asked to improve what they do (Lewin's freeze phases).

John P. Kotter – 8-step model of change

Since Kurt Lewin, much work has been done on change management and one of the most well-known names that come to mind when considering change management is John P. Kotter. He was one of the pioneers in this field. He established an 8-step model for change that is used today by many other authors and businesses. In figure 2 is this 8-step model, which sets out the steps to be taken when wanting to transform an organization. In this next section this framework will be thoroughly discussed, including the comments of other authors on his framework. The reason this this framework will be used in this research is that it looks at the process of change in a step-by-step method, which makes it suitable to analyse the possible influence of cultural differences on each step of the change process. As Kotter, and many other authors, state the change process is not a neat step-by-step approach, but more a back-and-forth process. However, it can give a clearer idea of what type of issues can arise during the process of change. Therefore, now the 8-step model of John P. Kotter (1995) will be explained in detail.

1. Establishing a sense of urgency

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learned Kotter that when about 75% of a company’s management is honestly convinced that business as usual is totally unacceptable. Anything less can produce very serious problems later on.

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Another important part of creating a sense of urgency is to establish whether there is a ‘readiness for change’ (Alas, 2007). This is with regard to employee attitudes, since change requires new skills and attitudes that require a certain effort. In order to use their energies for this purpose, employees should be motivated to maintain their position and membership in the organization. This “creating a readiness for change” can be led back to ‘unfreezing’ as mentioned earlier from the work of Lewin.

2. Forming a powerful guiding coalition

If a major renewal program does not have a powerful leadership coalition, if a minimum mass is not achieved early in the effort, nothing much worthwhile will happen. This coalition should be powerful in titles, information and expertise, reputations, and relationships. It should consist not only of members of senior management, but members from middle management and the ‘shop-floor’ as well, as to reach the entire organization. This means that the coalition will tend to operate outside of the normal hierarchy; this can be awkward, but clearly necessary, since, if the hierarchy was working well, there would be no need for a change. A high sense of urgency within the managerial ranks helps a lot in putting together a guiding coalition. However, it usually takes more than this. There will need to be someone who brings these people together and help them develop a shared assessment of the organization’s problems and opportunities and create a minimum level of trust and communication.

3. Creating a vision

In every successful transformation that was investigated by Kotter, the guiding coalition develops a picture of the future that is relatively easy to communicate and appeals to customers, stockholders, and employees. A vision always goes beyond the numbers typically found in five-year plans. A vision is something that helps clarify the direction in which the organization needs to move. Usually the first draft is a bit blurry and comes mostly from one individual. But after the coalition works together on it for some time, something much better emerges after analytical thinking and a little dreaming. Next step then is to develop a strategy to achieve that vision. So how should the organization look and what are the steps that need to be taken to get it there? If people do not have a clear sense of where they are going, they are much less likely to cooperate and might even work against the change. If you cannot communicate the vision to within five minutes and get a reaction that signifies both understanding and interest, you are not yet done with this phase of the change process.

4. Communicating the vision

In order for a transformation effort to be effective, those involved in leading the change have to use all available communication channels to communicate the vision and the strategy for getting to where the organization has to be according to that vision. These communication channels could be:

• Newsletters with articles about the vision

• Management meetings with discussions of the transformation

• Courses to educate with a focus on business problems and the new vision

The guiding principle is simple: Use every possible channel, especially those that are being wasted on nonessential information. So do not just hold a single meeting or send out a single communication. Those leading the change are most effective if they “walk the talk”; they consciously attempt to become a living symbol of the new corporate culture.

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do this, commitment from the top is needed, as well as clear visible leadership to serve as a role model. The message on change that is communicated should be clear, consistent and coherent (Steffen, 2000).

Oliver states that about 20% of the people in an organization are ‘moaners’ (disliking and resisting the change), 20% are flag-wavers of change and the other 60% is the key audience of communication, since they are the ones that need persuading and if a certain momentum is reached this entire group will follow the change, with regard to this, people are like sheep and will follow the rest of the group. What Oliver states as what should be communicated next to the vision that was created:

• Good practice

• Hints & tips

• New initiatives

Furthermore, it is a good idea to set up a way to share the knowledge and a medium to communicate across borders when faced with change in different parts of an international organization.

Communication comes in both words and deeds, and the latter are usually the more powerful form. Since important individuals acting inconsistent with their words can be very undermining of a change. Communication on change is first and foremost for the employees, those people directly influenced by the change, but it is important to consider who else will be affected by the change and to develop a dialogue with those stakeholders, since people want to know how a change will affect them. These stakeholders can be (Steffen, 2000):

• Investors

• Customers

• Staff

• Local & virtual communities

• Regulatory bodies

• NGO’s (non-governmental organizations)

• Former employees

• Strategic partners

• Prospective customers

• Prospective recruits

• Media

5. Empowering others to act on the vision

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Ways to let people actively participate (Armenakis & Harris, 2009):

• Enactive mastery (gain confidence by doing a certain task)

• Vicarious learning (learning that occurs as a function of observing, retaining and replicating behaviour observed in others)

• Participative decision making

6. Planning and creating short-term wins

For a change to happen it takes time and when there are no short-term goals to meet, the renewal effort will most likely lose momentum. Without short-term wins people may give up, or actually join those that are resisting the change. Creating short-term wins is something else than hoping for them, the latter is passive, the former active. Managers have to look actively for ways to obtain clear performance improvements, establish goals in the yearly planning system, achieve the objectives, and reward the people involved with recognition, promotions and even money. Commitments to produce short-term wins help keep the urgency level up and force detailed analytical thinking that can clarify or revise visions.

7. Consolidating improvements and producing still more change

With the first clear performance improvement, managers may be tempted to declare victory. Celebrating a win is fine, however, declaring the war won is catastrophic. Changes first need to sink deeply into the organization’s culture. This process could take up to five or ten years; new approaches are fragile and subject to regression. Premature victory announcement kills momentum and the powerful forces associated with tradition creep back in. Instead of declaring victory, those leaders that led successful change efforts used the credibility afforded by short-term wins to tackle even bigger problems (e.g. systems and structures that have not been confronted before).

8. Institutionalizing new approaches

According to Kotter (1995) “change sticks when it becomes ‘the way we do things around here’, when it seeps into the bloodstream of the corporate body”. This means that it becomes rooted into the social norms and shared values of the organization. When this is not yet the case and the pressure for change is removed, it is subject to degradation. Two factors are important in institutionalizing change:

1. Show how the new approaches, behaviours, and attitudes have helped improve performance. If people have to make the connections on their own, these can be inaccurate. Helping people see the right connections requires communication.

2. Take sufficient time to make sure that the next generation of top management personifies with the new approach.

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Comparison of the two models

When considering Kotter’s model of change one can see the steps of Lewin’s freezing phases in it. Lewin says that first the organization should be made ready for change, in Kotter’s model this can be seen in the first few steps: Establishing a sense of urgency, forming a powerful coalition, creating a vision and communicating the vision. These first four steps of Kotter’s model seem to be derived from Lewin’s first step of unfreezing, but in more detail. What these steps show is that people within an organization need to understand that the way business is going is not the way it should be, people have to get the idea that the current situation is not a desirable one. Since change is about moving from a current state to a desired future state.

The next step in Lewin’s model is the change itself, this is in Kotter’s model: Empowering others to act on the vision, planning and creating short-term wins. When people are in that ‘flow-state’ of willingness to change, the change needs to happen, the so-called transformation in Lewin’s model. Final is the step of refreezing in Lewin’s model, which is comparable with Kotter’s steps of: Consolidating improvements and producing still more change (which is partly still changing) and institutionalizing new approaches. In this final phase there needs to be a consolidation of the change, the change needs to be adopted and institutionalized. Lewin says that the organization needs to refreeze again, however, there are others that say that the organization needs to stay fluent and be ready for change at any time and not become complacent. Weick and Quinn (1999) divide change in two categories, episodic change, which is change that happens every once in a while, it is a grouping of organizational changes that tend to be infrequent, discontinuous and intentional. The presumption is that episodic change occurs during periods of divergence when organizations are moving away from equilibrium conditions. Continuous change is a name for those changes that tend to be on-going, evolving, and cumulative. A common presumption is that change is emergent, meaning that it is the realization of a new pattern of organizing in the absence of explicit a priori intentions.

A summary of this comparison can be seen in table 1 where Kotter’s steps are placed under the corresponding phases of Lewin’s model.

Unfreezing

Establishing a sense of urgency

Forming a powerful guiding coalition

Creating a vision Communicating the vision

Transformation

Empowering others to act on the vision Planning for and creating short-term wins

Freezing

Consolidating improvements (and producing still more change, this element is still part of the transformation phase)

Institutionalizing new approaches

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Using Kotter’s model

When considering the above comparison of the model of Lewin and Kotter it can be seen that there are striking similarities. Kotter’s model is mainly more elaborate, considering more different steps in the process of change. This is the case for many other models in the literature as well, some have a step less or extra in the process, but in essence are very comparable (Armenakis and Harris 2009, Alas 2007, and Oliver 2000). For the purpose of this paper Kotter’s model is very suitable, it gives a good basis for investigating the influence of differences in culture on each step of the change process.

3.2 Factors of success in change management

One of the main success factors in change management is dealing with resistance to change. Kotter and Schlesinger (1979) discuss some of the main hurdles that managers can encounter when attempting to successfully implement change. Their methods to take or avoid these hurdles are based on their analyses of a dozen successful and unsuccessful organizational changes. In essence they provide some insight as to make sure the outcome of a change process is more successful. Diagnosing resistance to change

Organizational efforts usually run into some kind of human resistance. Even though most managers are aware of the fact that this might occur, very few take the time, before implementing an organizational change, to assess this resistance and who might be resisting the change. There are a number of reasons why employees would resist change:

• Parochial self-interest – people think they might lose something of value as a result of the change.

• Misunderstanding and lack of trust – some employees may resist change if they do not understand the implications of the change and think that they will lose more than that they will gain.

• Different assessments – employees may assess the situation and the need for change differently than the manager.

• Low tolerance for change – many people are afraid of what they do not know, and therefore avoid change in general.

Dealing with resistance – ways of ensuring a more successful change process

1. Education and communication – educate the employees beforehand. Communication of ideas helps people see the need for and the logic of change (one-on-one discussions, presentations to groups, memos, reports, etc.)

2. Participation and involvement – if initiators involve the prospective resistors, they may forestall resistance.

3. Negotiation and agreement –e.g. give employees a higher wage in return for a work rule change.

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5. Explicit and implicit coercion – managers often deal with resistance coercively, they essentially force people to accept a change by threatening them. This is, however, a risky process, since people generally strongly resent forced change.

Depending on how much time is available for the change process a more elaborate way of dealing with resistance can be used, while, if there is only little time available, a more coercive method may be necessary. The first three ways of dealing with resistance are already apparent in the change process model of Kotter, discussed in the previous section.

3.3 Influence of cultural values on international (change) management

One key result of internationalisation is that international managers face an external environment more complex, more dynamic, and more uncertain than ever before. The elements of the international manager’s environment can be divided, according to David Thomas (2002), into four categories: economic, legal, political, and cultural. Each one of these will influence the international change process as well; the focus of this paper will be with the last category, culture. So it is not said that the other factors will not influence the change process, it is very likely that they will. However, looking at each of them is beyond the scope of this research.

Culture is the least easily definable of the four categories and likely the most difficult for change mangers to take into account, due to its intangibility. This research is an attempt to find a way to make this more tangible.

Working outside of one's own home country is not easy. It means struggling with a new language, a different culture and, more importantly understanding diverse values. An expatriate should be very careful in the application of practices and methods that were successful in his/her country: they might not work in the host country. Operations can, and often meet with failure when applied to another environment if the local customs and values are not considered (Firoz & Ramin, 2004). As said earlier, little attention has been given to the effect of cultural differences on the process of change.

Next the literature on the influence that cultural values have on international management will be considered. Since the model of Kotter considers several steps of change management a framework is needed to consider in what way cultural values impact each of these steps in the change process. First, however, a little introduction to the concept of culture, in order to establish what is meant by this in the context of this research. There is no one clear definition of what culture encompasses. However, one that is often used by other authors is the definition by Hofstede:

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(occupational culture), a type of business, a work organization or part of it (organizational culture), or even a family.”

Hofstede, 1994

Culture is not only intangible and elusive, but it can also be observed at multiple levels in an organization. Culture is reflected in values, norms, and practices. At the deepest level, culture consists of values, which are embedded, tacit preferences about what the organization should strive to attain and how it should do so. Values are often difficult to articulate and even more difficult to change (De Long & Fahey, 2000). It is therefore difficult to change culture, so one has to work with culture in mind, but not with the intention of changing it, but making change work with the culture. So it is important to keep in mind how culture could influence the process, what the cultural values are and how to make sure that these cultural differences do not inhibit the process of changing the organization.

So what exactly are these cultural differences? How do countries differ and along which dimensions? There have been numerous researches to figure out what these dimensions are and how they influence business. One of the first substantial and most cited works on this was done by Geert Hofstede.

Geert Hofstede

Between 1967 and 1973 Geert Hofstede analysed a large database of employee values scores collected by IBM covering more than 70 countries, from which he first used the 40 largest only and afterwards extended the analysis to 50 countries and 3 regions. In the editions of Geert Hofstede's work since 2001, scores are listed for 74 countries and regions, partly based on replications and extensions of the IBM study on different international populations done by either Hofstede himself or other researchers in the field. Subsequent studies, validating the earlier results, have included commercial airline pilots and students in 23 countries, civil service managers in 14 counties, 'up-market' consumers in 15 countries and 'elites' in 19 countries. From the initial results, and later additions, Hofstede developed a model that identifies four primary dimensions to assist in differentiating cultures:

• Power Distance

• Individualism

• Masculinity

• Uncertainty Avoidance

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1. Power distance – The extent to which less powerful members of organizations accept and expect that power is distributed unequally. All societies are unequal, but some are more unequal than others.

2. Individualism – This is compared to the other side of Collectivism. In individualist societies the ties between individuals are loose; everyone is expected to look after themselves. In collectivist societies people are integrated in a strong cohesive in-group.

3. Masculinity – Here Femininity is the opposite value. It refers to the distribution of roles between the genders. The assertive pole is called masculine and the modest, caring pole is called feminine.

4. Uncertainty Avoidance – This dimension deals with the tolerance for uncertainty and ambiguity. It indicates to what extent people feel comfortable or uncomfortable with uncertainty.

5. Long-Term Orientation – The opposite of this value is Short-Term Orientation. Values associated with Long-Term Orientation were found to be thrift and perseverance; values associated with Short-Term Orientation were respect for tradition, fulfilling social obligations, and protecting one’s ‘face’.

The work of Hofstede (1980, 2001) has done much to show how people, who are in many ways similar (i.e. IBM employees), can still have very different values and attitudes depending on the country from which they originate (Inklaar & Yang, 2010).

For the purpose of this study the much cited work of Hofstede is relevant. The reason for using this study of the source of differences in national culture while looking at organizations is relevant, even though every single organization has its own culture, since organizational culture is strongly influenced by national culture. National culture influences the way organizations are managed and the processes that take place within organizations. Thomas (2002) states that, the possible effect of organizational culture is in its compatibility with national culture. Research suggests that national-level or societal-national-level culture influences the relationship of organizational culture to organizational outcomes. For example, studies found that matching societal and organizational cultures resulted in higher job satisfaction (Lincoln et. al, 1978), more effective quality circles (Ferris and Wagner, 1985), and better decision making (Misumi, 1984). Organizational culture might be a somewhat different construct and composed of different elements from that of national culture, however, entry to and transmittal of organizational culture occur in different ways and at different times from national culture. Thus, for the purpose of this study national culture will be taken into consideration when analysing the different steps of the change process within organizations and the influence culture might have on each step.

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So due to the usefulness for looking at organizational culture by considering national culture and the explaning power of one of Hofstede’s dimensions and the validation of all of his dimensions in subsequent work lead to using his framework for this research. This framework will be used to consider the influence of national culture and the difference therein on each step of the process of change.

In the next section each step of the framework of Kotter on the process of change will be analyzed and for each step the possible influence of the cultural dimensions of Hofstede will be considered in order to develop hypotheses with regard to expected influence of culture on the different steps of the change process.

4. Hypotheses

In this section the different steps defined by Kotter in the process of change will be analysed with regard to the possible influence of cultural differences on each step and how Hofstede’s model can give us an idea what can be expected in different cultures with regard to those steps. For example in Hofstede’s model it is said that in countries where power distance is high, hierarchy plays an important role in society, and most likely in organizations as well. This could mean that hierarchy plays an important role in the process of change as well. If this research shows this to be an explanatory factor for behaviour, then, knowing that a country has a high power distance, the change manager could take this into account when implementing a change. How the manager could do this will be discussed later in this research.

4.1 Development of hypotheses

Before actually starting the change process, the organization going into a country (and organization) and the organization ‘receiving’ the change process have to come to an agreement as to what type of change is needed and who will take the initiative for the change, top-down or bottom-up. Top-down meaning change initiated and actively pursued by top-management and bottom-up meaning that change initiatives come from the shop-floor. This influences the entire change process and what role the change manager will play within the organization. It is likely that the choice for a bottom-up or a top-down initiated change can be influenced by culture. It depends on how people view authority (what score the country has on the dimension ‘power distance’). If the employees value hierarchy and the distance between those in management and the employees is large, then a top-down approach would be better received. This leads to the first hypothesis:

Hypothesis 1: When power distance is high, a top-down initiated change process is more likely to be successful.

Step 1 – Establish a sense of urgency and create readiness

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values and the degree of uncertainty avoidance could influence whether or not the employees will be comfortable or uncomfortable with this unfreezing step.

The point of this step in the change process is to let employees discover why there is an urgency to change. In this step they find out why it is so important to have this change. This step is to attempt to help people accept the change. When someone is likely to be avoiding uncertainty (Hofstede’s Uncertainty Avoidance Index), they are probably much less likely to appreciate change at all, since change leads to uncertainty, people will be unsure of the outcome. Thus, those organizations with people who are likely to want to avoid uncertainty will be less willing to change. Therefore this is an important step for organizations in those countries where uncertainty avoidance is high. The second hypothesis therefore is:

Hypothesis 2: When uncertainty avoidance index is high it is especially important to create an urgency to change in order to improve readiness for change, for the change to be successful. This does not imply that when uncertainty avoidance is low that the change process will be less successful if there is a strong urgency to change. However, when uncertainty avoidance is high, it is likely that creation of urgency to change is very important and if not thoroughly taken into account in the process the change process it will likely lead to a less successful process (if this hypothesis holds true).

Step 2 – Form a powerful coalition

In previous research it shows that a change process is more likely to succeed if the coalition is diverse and consists of people from all over the organization. This step is to ensure that everyone within the organization sees the importance of the change and works together to achieve this. However, this means that the coalition will tend to operate outside of the normal hierarchy. So when there is a high power distance, where hierarchy plays an important role, it is likely that it will be difficult to create a powerful coalition with employees from all over the organization. Hence the third hypothesis is: Hypothesis 3: When power distance index is low, a powerful coalition is more easily formed, and the change process is more likely to be successful.

Step 3 – Create a vision

The purpose of this step is for the entire organization to get an idea of where the organization will be going. So what is the change encompassing and what will the organization look like after the change has taken place? In essence this step is meant to decrease the uncertainty about the change and what the organization will be like after the change has taken place. Therefore, it is likely that when uncertainty avoidance is high, this step is an important one to improve the chance of successfully implementing the change. This leads to the fourth hypothesis:

Hypothesis 4: When uncertainty avoidance is high, it is especially important to create a vision of the future state of the organization, in order for the change process to be successful.

Step 4 – Communicate the vision

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Index comes into play again with regard as to how to communicate the vision. As said before, if the outcome is unsure, there is uncertainty, which would lead people who would rather avoid uncertainty to pull up barriers to change. Thus the fifth hypothesis arises, which is closely related to hypothesis 4:

Hypothesis 5: When uncertainty avoidance index is high, the change process is more likely to be successful when the future state of the organization is clearly communicated.

Step 5 – Empowering others to act on the vision

As stated in the literature review it is found to be important to have people within the organization empowered to act on the created vision. However, it may be that some people would rather not ‘stick their neck out’ and be responsible for the process of change. Also here, uncertainty avoidance is likely to come into play, since if people want to avoid uncertainty, they are less likely to take a risk and be part of the change process. Hence the sixth hypothesis is as follows:

Hypothesis 6: When uncertainty avoidance index is high people will be less likely to want to be part of the group empowered to act on the created vision.

Step 6 – Planning and creating short-term wins

If people see that the change process is actually leading to something good for the organization, they are more likely to be committed to the change. Especially when the duration of a change process is long, this step is important. Moreover, when planning within a country is short-term, people are probably more likely to be committed to a change if they see that the change of the organization is a good thing. Here it is possible that the cultural dimension of long-term orientation of Hofstede comes into play. This leads to the next hypothesis:

Hypothesis 7: When long-term orientation is low, the change process will be more successful when short-term wins are created.

This does not mean that when long-term orientation is high that the change process will be less successful if short-term wins are created, however, when long-term orientation it is low, it is likely that short-term wins are very important and if left out of the change process will likely lead to a less successful process (if this hypothesis holds true).

Step 7 – Consolidating improvements and producing still more change

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Step 8 – Institutionalizing new approaches

According to Kotter (as mentioned in the literature review) this step means that the change has to become rooted into the social norms and shared values of the organization. When this is not yet the case and the pressure for change is removed, it is subject to degradation. It is arguable that in a society that is collectivist in nature, that when the change is accepted by a part of the employees, it is likely to get accepted by most people within the organization. However, the opposite could happen as well, that when some of the employees fall back into old habits, everyone else will follow suit. Therefore it is difficult to determine in what way this step will be influenced by culture, it is likely that it will be influenced, but the extent and in what way is hard to predict.

4.2 Summary of hypotheses

Hypothesis 1: When power distance is high, a top-down initiated change process is more likely to be successful.

Hypothesis 2: When uncertainty avoidance index is high it is especially important to create an urgency to change in order to improve readiness for change for the change to be successful.

Hypothesis 3: When power distance index is low, a powerful coalition is more easily formed, and the change process is more likely to be successful.

Hypothesis 4: When uncertainty avoidance is high, it is especially important to create a vision of the future state of the organization, in order for the change process to be successful.2

Hypothesis 5: When uncertainty avoidance index is high, the change process is more likely to be successful when the future state of the organization is clearly communicated.

Hypothesis 6: When uncertainty avoidance index is high, people will be less likely to want to be part of the group empowered to act on the created vision

Hypothesis 7: When long-term orientation is low, the change process will be more successful when short-term wins are created.

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5. Methodology for data collection and analysis

Now that we considered the change management model of Kotter and the expected influences of cultural dimensions on the different steps of this model it is time to investigate the value of the hypotheses set out earlier. In order to do this the case of VEI will be used.

Case of VEI

This case-study of VEI will provide the data needed to investigate the value of the hypotheses set out in the previous section. This case study is used in order to explore the possible influences of culture on the process of change.

Vitens and Evides, the two largest drinking-water companies in the Netherlands, have joined forces in the company VEI. The alliance (joint venture) gives the company ample strength and enhanced opportunities to grow internationally. Through this international subsidiary, they make their knowledge and expertise available to water companies in developing countries. This is needed badly as around the world, a large number of people still have no access to safe drinking-water and basic sanitation. On a non-commercial basis and attempting to go without financial risks, VEI is contributing towards achieving one of the United Nations’ Millennium Development Goals: halving the number of people around the world without access to clean drinking-water and sanitary facilities by 2015 (Vitens-Evides International, 2008).

To understand better how VEI works in these projects the working arrangements VEI has will be set out next, the arrangement used differs per project.

Working arrangements at VEI

VEI works abroad in three different ways; these are (Vitens-Evides International, 2008):

• Management contract - A management contract is an arrangement under which operational control of an enterprise (the local organization) is vested by contract in a separate enterprise (VEI in this case) which performs the necessary managerial functions in return for a fee.

• Service contract – this means that VEI is mainly present in an advisory role; decisions are made by the local directors.

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VEI sets out to help improve the local water companies. Depending on the expected results they go there as a manager, operator and/or consultant. Some of the most important features of the projects VEI does are (Vitens, 2010):

• Focus on urban drinking-water service and sanitation

• Focus on business performance

• Focus on the real needs of the water companies

• Focus on capacity building and transfer of knowledge and expertise

• Attention for the institutional framework

• Combination of human resources with operational investments

• Not investment driven

• Not-for-profit, not-for-loss

When considering these features one can see comparisons with other utility companies, such as energy companies. This could mean that the findings for VEI could be a reason to investigate other utility companies as well and compare those findings with the ones from this study.

However, to evaluate the value of the earlier set out hypotheses, it is necessary to have objective values of Hofstede’s dimensions for the different countries where VEI is active in. Then can be seen whether, for example, in a ‘high power-distance country’ top-down initiated change processes indeed work better. There is a minor problem here though, since not all countries were investigated by either Hofstede or by others replicating his study.

For this study the scores for three out of the five countries where VEI is active in are missing, these are: Malawi, Mongolia and Mozambique. Research for these countries would require interviews with a large enough sample from each of the countries. However, as Hofstede explains in his 2005 book (Hofstede & Hofstede, 2005) there are variables that explain part of the variance in the country scores. For this research an estimation of the country scores by doing a regression for the three dimensions that will be used (Power Distance Index (PDI), Uncertainty Avoidance Index (UAI) and Long-Term Orientation (LTO) ) will be utilized. Next will be set out which variables are said to explain part of the variance in country scores.

Scores for PDI: Hofstede states (Hofstede & Hofstede, 2005) that the PDI scores of a country can quite accurately be predicted on the basis of:

1. Geographical latitude – higher latitude, smaller PDI

2. The population size of the country (higher population, more PDI) 3. Prosperity of a country (richer countries, smaller PDI)

So a list of all the countries where the country scores were calculated for were made as well as their geographical latitude, population size and GDP per capita in US dollars and next run a regression (ordinary least squares regression, OLS) to estimate the values of the missing countries.

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attached to certainties while Protestants are more willing to face uncertainty. This assertion is summarized by Weber as “the Protestant prefers to eat well, the Catholic to sleep undisturbed.” The correlation between the shares of these religions in the population is indeed as hypothesized with more Catholic countries showing a higher degree of uncertainty avoidance and more Protestant countries a lower degree (Inklaar & Yang, 2010). Considering this earlier work a regression will be run with the list of countries, their values for Catholicism and Protestantism, in order to estimate the values of UAI for the countries under investigation.

Scores for LTO: A correlation was found between LTO and the growth in percentage of nominal GDP’s per capita between 1970 and 2000. The more growth, in terms of percentage, the higher LTO is. With these notions in hand the necessary data can be gathered, and run a final regression to estimate the missing country scores of Malawi, Mongolia and Mozambique.

Once these values have been calculated a prediction can be made, on the basis of the hypotheses, what the likely influence is of the culture of the five countries on the change management process and what would be the right choices to make for each step of the change process where culture is likely to have an influence. Finally the hypotheses will be evaluated, and the predictions based on those hypotheses by interviewing people of VEI currently working in Ghana, Malawi, Mongolia, Vietnam and Mozambique.

6. Data

For this section there are two different types of data. Predictive data consists of the data to calculate the ‘objective’ Hofstede values, the information on working arrangements at the different projects of VEI and information on culture gathered from the interviews with the expatriates during a few days of VEI team days in the Netherlands. The other type of data is data gathered to test the hypotheses, which are from interviews with VEI expatriates conducted after these team days via e-mail. This data involves how change is managed and what influence culture seems to have on the change process.

6.1 Predictive data

In appendix 2 there is a list of the countries and their PDI, UAI and LTO scores covered by the work of Hofstede. Some have been estimated by Hofstede and for some countries in the Middle East and Africa survey responses have been pooled so that, e.g. Ghana and Nigeria have the same score. Since Ghana is part of the sample of my study each of the countries out of the pooled groups were put separately in the list. For each country the country scores and the variables (appendix 3, 4 and 5) required to run the regressions to estimate the missing country scores are given. As can be seen in the appendices not for every one of the countries all dimensions are available, the study for LTO included fewer countries than the study for PDI and UAI did.

Projects of VEI

Here the projects VEI has abroad will be considered separately to understand what type of changes VEI attempts to make in cooperation with the local water companies. In appendix 6 there is an overview of the face-to-face interviews that give more detail on the projects in the respective countries. These interviews give an overview of how the project leaders see their projects and the people they work with.

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Country Aim Working

arrangements Ghana

2006-2011

• Restore local company to sound financial footing.

• Improve water availability and quality

• Streamline operations.

• Lower leakage losses

• Improve financial and commercial processes

• Improve customer services

Management contract

Malawi 2009-2013

• Improve supply of affordable, sustainable and reliable drinking water

• Improve techniques of water purification- and distribution-networks

• Improve management of the local water company

• Expansion of drinking water supply

Service contract

Mongolia 2007-2010

• Improve water availability

• Introduce new sustainable management of sources

• Development of financial management

• Improve conduct of business, sewerage and sanitation

• Advise local water supplier in institutional reformations aimed to more autonomy and transfer of ownership of piping and purification installations from the

municipality to the local water supplier

Water Operating Partnership Vietnam – Da Nang 2007-2010

• Improve quality of tap water

• Improve financial management system

• Improve customer registration system and set up professional billing- and collection system

Water Operator Partnership

Vietnam – Ho Chi Minh 2008-2011

• Management and maintenance of water production

• Professionalize distribution tasks

• Improve water cleaning system and distribution network

• Connect home piping

Mozambique 2005-2012

• Improve daily operation of the water companies

• Support development of standard procedures (production, distribution and sales)

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Most of the expatriates currently working at VEI’s overseas projects have experience in other projects at other companies as well. They have managed change before, but almost always they notice that culture has a certain impact on the change process, but they cannot predict what and how large this impact could be. This is what was attempted to ascertain through this study.

The interviews are focussed on culture; however, it becomes clear quickly that culture is not the only bottleneck in the process. In Mongolia for example the employees and managers are not used yet to the free market system and communism still echoes in the way they work together and do business. It is, nevertheless, not within the scope of this study to investigate all possible influences on the process of change.

The interviews consist of two parts, one part are interviews with the expatriates during a few days of VEI team days in the Netherlands. After meeting with the expatriates face to face and working on this study, more questions arose. However, since they all went back, these questions had to be asked and answered via e-mail.

These questions were aimed at getting a better idea of how exactly change processes take shape (keeping in mind the cultural dimensions intended to be tested) at the different projects at VEI in order to prove or disprove the hypotheses.

These questions were:

1. When in a change process, do you (or the partner-company) use a top-down or bottom-up approach (so do managers take initiative, or can ideas for change come from any layer within the company)?

This question is to find out whether the change processes are (usually) initiated top-down or bottom-up. This is to gather information to test hypothesis 1 (which was: When power distance is high, a top-down initiated change process is more likely to be successful).

2. Do you notice in the change process, whether employees respond better to an upcoming change when a strong sense of urgency for the change to happen is created and the future state of the organization is clearly communicated?

To find out whether hypothesis 2 holds any value (When uncertainty avoidance index is high it is especially important to create an urgency to change in order to improve readiness for change for the change to be successful) it is necessary to know whether this creation of urgency indeed does improve the readiness for change. However, a note here: it may be likely that in any case employees respond better to an upcoming change when a strong sense of urgency is created and that it is difficult to measure whether or not this influence is stronger in countries with a high uncertainty avoidance index. Furthermore this question is aimed to gather information for hypothesis 5 (When uncertainty avoidance index is high, the change process is more likely to be successful when the future state of the organization is clearly communicated).

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To test hypothesis 3 (When power distance index is low, a powerful coalition is more easily formed, and the change process is more likely to be successful) and 6 (When uncertainty avoidance index is high, people are less likely to ‘stick out their neck’ and thus will be less likely to want to be part of the group empowered to act on the created vision) this question was asked. Are the employees willing to take a chance (stick out their neck) to help the process of change? 4. In the change processes, do you create ‘short-term wins’ (visible small improvements during

the process)? And if you do, do you notice whether the employees respond well to them? So is the change process better if people see that there are small gains to be made?

Hypothesis 7 (When long-term orientation is low, the change process will be more successful when short-term wins are created) will be tested with the information gathered from this question. As stated earlier, this does not mean that when long-term orientation is high that the change process will be less successful if short-term wins are created, however, when long-term orientation it is low, it is likely that short-term wins are very important and if left out of the change process will lead to a less successful process.

The first face-to-face interviews and the interviews with the answers to these questions and answers by the different managers per country are in appendix 6.

7. Analysis and results

In this section first the ‘missing’ Hofstede country scores on the cultural dimensions will be calculated by estimating them through ordinary least squares regression. After which the expected influences of the country scores on the change process will be set out.

After analysing the interviews an overview of the real perceived influences of culture on the process by the managers of the different projects of VEI will be given.

7.1 Hofstede values and calculated estimates

As said, not all country scores of Hofstede’s cultural dimensions are available. Therefore a way had to be found to estimate these values for the countries in this study. In order to do this ordinary least squares (OLS) regression was done. By doing this regression an estimation of the values of PDI, UAI and LTO were found for each of those missing countries. These regressions were based on variables found in earlier research (Hofstede 2005 and Inklaar and Yang 2010).

Estimation of PDI

Using the data from appendix 3, it was found that only the variable geographical latitude is a good explanatory variable for PDI3

, the regression shows a strong significant correlation (P>|t|=0.000), where a higher latitude is paired with a lower PDI. The latitude explains about a quarter of the variation in PDI (R-squared = 0.2562). The other variables, population and GDP did not add any explanatory value; both variables do not differ significantly from zero. This outcome with latitude as variable is shown in table 4. In appendix 7 are the estimated values using this regression model. The values in the table in the appendix include also those of the countries that Hofstede (or subsequent

3

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authors) did research for and as can be seen, the estimated values are most of the times not that different from the researched values investigated by Hofstede and subsequent researchers.

Table 3: Ordinary Least Squares Regression for PDI

Estimation UAI

For estimating the scores for UAI (through OLS regression) the data from appendix 4 was used and it turned out that both variables, proportion of Catholics and Protestants in 1980 (this year was used since Hofstede published his research then) are very relevant, with more catholic societies showing higher rates of uncertainty avoidance and more protestant societies showing lower rates of uncertainty avoidance. This is in line with earlier research by Inklaar and Yang (2010). In table 5 it can be seen that the results from the regression shows the significant correlation (P>|t|=0.002 and (P>|t|=0.005). These variables explain little over a quarter of the variation. The values estimated for UAI are in appendix 8.

Table 4: Ordinary Least Squares Regression for UAI

Source | SS df MS Number of obs = 75 ---+--- F( 1, 73) = 25.15 Model | 8540.071 1 8540.071 Prob > F = 0.0000 Residual | 24788.6757 73 339.5709 R-squared = 0.2562 ---+--- Adj R-squared = 0.2460 Total | 33328.7467 74 450.388468 Root MSE = 18.427

--- pdi | Coef. Std. Err. t P>|t| [95% Conf. Interval] ---+--- lat | -.6078543 .1212088 -5.01 0.000 -.849423 -.3662856 _cons | 79.12054 4.278344 18.49 0.000 70.59382 87.64727 ---

Source | SS df MS Number of obs = 74 ---+--- F( 2, 71) = 12.60 Model | 9850.30023 2 4925.15011 Prob > F = 0.0000 Residual | 27745.0511 71 390.775368 R-squared = 0.2620 ---+--- Adj R-squared = 0.2412 Total | 37595.3514 73 515.004813 Root MSE = 19.768

Managing change across borders