Facility Copy-Paste

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Rijksuniversiteit Groningen

Facility Copy-Paste

Cultural disturbances on Facility Set-Up

Enrico Turrin S2747308 7/7/2015

MSc Supply Chain Management

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Abstract

Purpose – The purpose of this paper is to investigate the influence of cultural uncertainty avoidance and

power distance on the establishment of a foreign facility. Moreover, this study elaborates on the strategies that can be used by organizations to solve culture-derived issues when setting-up a foreign facility.

Design/methodology/approach – An in-depth case research is here conducted within a manufacturer of

customized handling solution as setting. The author followed the first attempt of a Romanian firm to establishing its first oversea site in China through semi-structured interviews with the management. Hofstede’s taxonomy of culture with a focus on uncertainty avoidance and power distance are used to explain the issues faced in moving to the new region.

Findings – The results highlights two broad categories: internal and external issues. The former includes

“lack of employees commitment”, “low workers independency”, “gap management-employees”. The latter refers to issues in matter of “communication with suppliers”. With regards to the strategies used to prevent these issues, the author found them related to “recruitment policy”, “interactions with employees”, “training” and “communication with suppliers”.

Acknowledgements

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1. Introduction

The willingness of managers to copy their business elsewhere has to deal with less tangible issues that on paper do not emerge. Setting up a facility implies decisions regarding an effective design and a shared consensus of how the facility should be managed. These are just a few areas that need to be addressed. However, national culture may create conflicts and misunderstandings that prevent the company from a smooth transfer to the new regions. The premise is that the philosophy and the best practices of the company are safeguarded irrespective of the position on the map. Unfortunately, several issues arise during the path toward the new status and their consequences cannot be predicted upfront but need to be dealt on the field, as they manifest.

According to the contingency theory, the environment in which the business is set influences the decision-making and the management approach (Luthans, 1976). With this in mind, a new body of research called OM practice contingency research emerged that focuses on the contextual conditions of operations (Sousa, Voss, 2008). Several attempts of using the contingency theoretical lens with OM issues are documented in the related literature with particular regard to manufacturing (Boyer et al., 2000; Ketokivi, 2006). In particular, the influence of national culture on the effectiveness of management procedures received significant attention in OM and it proved to be relevant (Kull and Wacker, 2010; Power et al., 2010; Wiengarten et al., 2011; Wiengarten, 2014). Along these lines, the absolute standardization of input, output and skills is compromised by the geographic region when expanding operations globally (Ho et al., 2012). However, it is not clear in which way this happens.

The studies conducted to date call for an improved and deeper understanding of these interactions between intangible cultural traits and the field of operations management. At the moment, there is no research regarding the role of national culture when setting up a facility in a foreign country and thus this paper aims at filling this gap. In fact, during the last two decades the low entry barriers for the eastern environment have fascinated more and more western organizations. Therefore, studies flowing into this lightly touched stream of research constitute an obligate direction.

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5 their logical link with the decision-making that is required in the path towards facility set-up. Indeed, establishing a new facility implies several personal interactions with different entities, whether they are new employees or new suppliers. These entities, in turn, may exhibit behaviors that are conditioned by their opinion in matter of avoiding uncertainty and power distance. The former refers to the degree of comfort that people experience when dealing with novel and rare events. The latter, to the perceived unequal distribution of power between management and employees.

The following research question was formulated:

“How do uncertainty avoidance and power distance impact the facility set-up?”

Furthermore, a second complementary issue was addressed:

“What strategies can be used by companies to solve culture-derived issues when setting up a

foreign facility?”

By answering these, the contribution is twofold. First, resuming the work of the previous mentioned authors will enrich the still poor theory on cultural studies set in the OM reality. Second, managers will benefit of the practical experience and thereby lessons of a real and recent first attempt of expansion of an established company. An in-depth case study is conducted in a firm supplying internal material handling solutions for businesses in the fast-moving consumer goods (FMCG) industry. The firm, which is currently operating the production and assembly in the Romanian site, developed the concept of PAC (Palletising Assembly Centre) as a separate assembly-only facility. The PAC is based on the cellular design and CSi aims at replicating it in several regions. The managers responsible for the opening of their first factory in China provided testimony of their initial contacts with the oversea country.

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2. Theoretical background

The chapter starts with general considerations on the contingency theory and it presents the literature that used this theory as a base for research. In particular, the paragraph discusses the different contingencies used so far and then moves to the definition of culture, which is the contingency of this study.

Culture is a broad concept. In order to narrow the scope, the author focuses on the dimensions of uncertainty avoidance and power distance. These are discussed in terms of which behaviors in operations are explained because of their high or low emphasis.

Finally, it is universally accepted that the survival of an organization depends on its effective transformation of inputs into outputs, and this process takes place in the shop floor of the facility. Therefore, the chapter ends with a discussion on the role of the human component within the cellular manufacturing environment. This specific configuration has been preferred over the functional layout due to its relevant performance dependency on the human aspect.

2.1 Contingency theory and national culture

The contingency theory states that the environment in which the business is operated shapes the decision-making and leadership approaches (Luthans, 1976). This mentioned environment is formed by internal and contingent external variables (Waterhouse, Tiessen, 1978).

According to the contingency theory, the success of an organization is related to its efficient performance. Its survival is viable only if it reacts and/or adjusts accordingly to the environmental impulses. This reaction is appropriate if it creates a match between the “structural and contextual components” and the environmental impulses (Lawrence and Lorsch, 1967). In short, there is an entity (i.e. the firm) that basically remains unchanged and the surrounding environment, which differs. Therefore, there exists a best approach for each situation, which is determined by the characteristics of the environment. Lawrence and Lorsch (1967) were the pioneers in supporting the “to each its own” philosophy in terms of management strategy.

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Source Contingencies

Woodward (1958, 1965) Technology (system of production)

Burns and Stalker (1961) Environmental stability (rate of technological and market change)

Chandler Jr. (1962) Strategy (degree of diversification)

Lawrence and Lorsch (1967) Environmental uncertainty (rate of product innovation, changes in the market and/or process technology)

Perrow (1967) Technology (task characteristics: routine

engineering, craft, non routine), organizational structure (socializing institution, elite

psychiatric agency, custodial institutions, programmed learning school)

Thompson (1967) Environmental uncertainty, interdependencies between tasks/operations/resources

Mintzberg (1979) Organizational characteristics (age, size); technology (regulation, sophistication);, environment (complexity, hostility, stability, market diversity); power (internal power, external control)

Table 1: Overview of the contingencies discussed in literature

Contingency theory can give contributions to practice and theory in three ways (Donaldson, 2001): a) identifying the contingency factors that come with different environments; b) categorizing contexts according to the contingency factors; c) agreeing on the appropriate organizational responses. The herewith research refers to this framework by using national culture as the contingency factor related to the environment.

Culture is defined as ‘‘shared motives, values, beliefs, identities, and interpretations or meanings of significant events that result from common experiences of members of collectives that are transmitted across generations’’ (House and Javidan, 2004, p. 15).

The influence of culture on the effectiveness of management procedures received significant attention in OM and it proved to be relevant (Kull and Wacker, 2010; Power et al., 2010; Wiengarten et al., 2011; Wiengarten, 2014). These studies leveraged different frameworks that enable to operationalize culture across several dimensions (Hofstede et al., 1990; Schwartz, 1994; Hofstede, 1998; Trompenaars and Hampden-Turner, 1998; House, et al., 2002).

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8 changes around the world (Inglehart & Baker, 2000) called for a revaluation of his measures. Indeed, the data were collected in between 1967 and 1973 and they may be not trustful anymore (Inglehart & Baker, 2000). Taras et al. (2011) took care of this concern, which eventually refined Hofstede’s indexes by aligning them to the recent changes. Naor et al. (2010) made the distinction between national and organisational culture. The former refers to the beliefs shared by the society. These shape the overall behaviour (Hofstede, 1980). The latter identifies the common mindset of an organization’s workforce that separates it from another organization (Hofstede, 1990).

2.1.1 Uncertainty avoidance and OM

Uncertainty avoidance (UA) is defined as the degree of comfort that people experience when dealing with novel and rare events (Hofstede, Minkov, 2010). Countries scoring high in uncertainty avoidance are characterized by a great number of regulations and laws that are introduced with the purpose of reducing ambiguous situations. On the other hand, individuals living in low UA regions are more prone to cope with not clearly defined structures and feel at ease when borders are not strictly outlined.

A multitude of researchers highlighted the relevance of UA and numerous pieces of work emerged during the new millennium (Shenkar, 2001; Parboteeah, Addae, Cullen, 2005a; Scholtens & Dam, 2007; Tung 2008). Low UA countries show this tendency also through the way of defining roles and responsibilities within the organization. Indeed, these are usually barely outlined whereas a high score implies clearly defined channels and detailed job descriptions (Stupar and Branković, 2012; Frijns et al., 2013; Matusitz and Musambira, 2013). The effects of this cultural aspect proved to fully manifest in international business transactions rather than in domestic ones (Hofstede, 2001; Shenkar, 2001).

Two issues can represent the main obstacles for organizations trying to expand beyond the national borders. On the one hand, these firms try to get the most from standardization practices and thus, the focus is on aligning their operations and policies worldwide. However, national culture may impede the absolute standardization when companies are expanding (Ho, Wang, & Vitell, 2012). On the other hand, it is possible that the cultural values of employees of the foreign facility will influence their reactions and thus compliance to the management instructions (Kull, Narasimhan, 2010).

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9 populations whereas flexibility is characteristic of low UA regions. Cohen (2003) found that it is crucial for Chinese organizations to build positive long-term relationships with their workforce. Indeed, the employees know that their employment may be ended at any moment (Cohen, 2003). More recent studies (Teck- Hong, Yong-Kean, 2012) showed how the willingness of the company to invest in upgrading the skills of its workers often developed a feeling of obligation on the side of the latter to express more commitment.

2.1.2 Power distance and OM

As defined by Javidan et al. (2006), power distance (PD) indicates the degree to which less powerful employees perceive that power, authority, status and material possessions are unequally distributed. In general, cultures with low power distance are characterized by a more participative management behavior and workers act more independently from management’s directives (Hofstede et al., 2010; Carl et al., 2004). Therefore, autonomy is more valued in countries with a low level of PD and vice versa

.

In considering an employee whose attitude at work has been shaped by a management style that is typical of high power distance regions, then he/she is usually found not crossing the scope of his/her job description. In addition, it is unusual for them to take initiative and express personal opinion (Kirkman et al. 2009). Hence, workers blindly follow the leaders’ orders, as they are believed as belonging to a superior class of the hierarchical tree. Therefore, managers whose business asks the workers for a profile that requires feelings of involvement, autonomy and empowerment should not seek for applicants in high power distance cultures (Farh et al., 2007).

Javidan et al. (2006) affirm that by supporting the development of a safe working climate and by making the directives more clear and to the point are effective tools that managers can use when dealing with high power distance employees. This should foster their participation.

2.2 Cellular manufacturing and human component

Basically, shop-floor layout can be divided into functional and cellular manufacturing (Chan et al., 1997). The former calls for grouping similar machines together whereas CM clusters them depending on the families of parts that are to be produced. These cells prevent from back flow, cross flow between groups and all the needed tools to perform the job are easily available (Burbidge, 1991).

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10 reductions and decrease of material handling operations and work-in-progress (Gunasekaran et al., 2001).

Several authors in the last decades enriched literature about the technical considerations to be made when design and forming a cell (Singh, 1993; Kazerooni, 1997; Huber and Brown, 1991; Wemmerlov and Johnson, 1997; Park and Han, 2002, Shambu and Suresh, 2000; Albadawi et al., 2005). They mostly approached this problem by quantitative models and simulation focusing on the above-mentioned dimensions as well as pointing at the scheduling and employees morale. However, the full benefits of this configuration are not always achieved. Wemmerlov and Johnson (2000) address this phenomenon by highlighting that research overemphasized the numeric approach to forming and implementing CM. This led to neglecting the human component.

A limited circle of researchers asserts that considering both technical and human issues is cornerstone to a successful implementation of cellular manufacturing (Fraser et al., 2006a). Starting from the eighties, a body of research has grown elaborating on social and human facets of CM (Huber and Hyer, 1985; Wemmerlov and Hyer, 1987; Brown and Mitchell, 1991; Huber and Brown, 1991; Shafer et al., 1995; Norman et al., 2002; Olorunniwo and Udo, 2002; Fraser et al., 2006b).

Indeed, quantitative models fail at predicting the impact of less tangible aspects that may be described by means of job satisfaction, pay satisfaction, absenteeism and turnover. A relevant piece of work comes from Norman et al. (2002). They state that manufacturing companies can achieve an advantage over competitors through weighing more the human component during the cell creation process. Therefore, they argue that abilities as problem solving, teamwork and leadership are to be put on the same level as technical capacities like mechanics, mathematics and inspection.

In short, we can describe the required profile of a worker that is to be assigned to a cell as: talented to take decisions in first person, willing to bear greater responsibilities and high-scoring in communication and interpersonal abilities (Johnson, Manoochehri, 1990).

3. Methodology

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11 supplier relationships, training) that need to be reassessed and redesigned when copy-pasting a facility in an environment made of different laws, norms, beliefs and values. Hereby, culture is expressed through Hofstede’s taxonomy. The reliability and quality of his measures have been widely acknowledged by academics and all the items here reported fall into the notions of uncertainty avoidance and power distance.

A case study constitutes a suitable means to investigate on this issue. Indeed, it allows the collection of meaningful and rich data due to its exploratory nature (Yin, 1989). Facing unknown and not clearly defined variables paves the way for this research as theory can be derived through direct observation (Meredith, 1998; Bebensat et al., 1987). The single case study here reported enables an in-depth analysis of the phenomenon. Furthermore, case research best suits this study since it proved to gain meaningful insights when experiencing a greater access to the research field (Yin, 1994). Moreover, the behavioral and softer nature of the data to be retrieved calls for a methodology that enables the collection of colorful and rich information (Dyer, Wilkins, 1991).

As sharply pointed out by Gioia et al. (2012), the use of qualitative, interpretative research can overcome some of the restrictions of the classic scientific protocol. Thus, this research takes advantage of an inductive approach to develop the concepts as scientific rigor may repress the originality that this investigation requires.

3.1 Case Selection

A mid-sized company operating in the business of material handling machinery and end-of-line packaging solutions for the FMCG industry represents the setting. Around 400 employees are currently sustaining CSi’s business worldwide with the headquarters located in The Netherlands and the main production factory in northern Romania.

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12 CSi wants to be sure that the high level of know-how developed within the production site in Romania is maintained throughout all the PACs established around the world. In doing so, the company realised that a viable implementation of the assembly process elsewhere is not possible if the workers do not possess the required skills and knowledge that made them market leaders. Therefore, it was decided that the site in Romania would act as a “learning factory” in which employees recruited in the foreign state are trained according to CSi standards. These spend a formation period in the Romanian PAC and then they are sent back to work in their home-based facility. The whole process might be simple on paper but implies large investments comprising accommodation for the workers, dedicated personnel for active translation to assist Romanian workers, movements of individuals across nations and the list goes on. Thus, the price for this standardisation of human labor revealed to be rather conspicuous.

In order to answer the research questions, I will go through the process embarked by CSi Industries of setting up their first foreign factory in China. Table 2 below illustrates the scores according to Taras et al. (2011) dimensions for China and Romania, with the latter representing the setting from which I conducted my analyses. Taras et al.s’ (2012) scores range from -2 to +2. The higher the score (the closer to +2), the more accentuated is that specific cultural factor.

Table 2: Taras et al. (2012) values for UA and PD

Uncertainty Avoidance Power Distance

Romania 0,34 -0,58

China -0,08 0,18

Regarding uncertainty avoidance, Romania shows a higher score and thus its population is expected to rely more on formal rules and laws, people are more predictable and less reliant on constant exchange of feedback. Vice versa for China, whose index points at a higher tolerance for ambiguity and a less predictable behavioral pattern.

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13 Chinese management considers its role within the organization as much more valuable than the shop-floor worker, which is seen as a mere resource.

In order to provide the reader with a smooth and interesting presentation of the findings, I will go through the issues faced that stemmed from cultural outlines whilst reporting actual considerations recorded during the interviews. Thus, I will then elaborate on the steps taken by CSi to address them.

3.2 Data Collection

In order to do so, CSi gave complete access to all the company’s structures for several months and the management ensured a correct development of the study by lending its time for any eventual need of information. Given the “How” and “What” nature of the research questions, collecting data through interviews represents a powerful and proper means for data retrieval.

Semi-structured interviews constitute the heart of data collection. Indeed, given the particular type of research, these permit the access to information that might have been neglected through structured interviews. However, the author followed a general framework for the interviews (Appendix A). The participants used the questions as input to elaborate on the facility set-up process through the perspective of their own organizational function.

The interviews involved managers that had to deal directly with the foreign employees. First, the Project Manager coordinating all the activities for PAC China provided 360° considerations. Second, the Human Resource Manager elaborated on more personnel and country related issues faced in the initial phases of recruitment and training. Third, the Logistics Manager elaborated on the nuisances experienced with the array of suppliers taking care of the provision of parts for the Chinese site.

Voice recording including transcribing of the interviews allowed for a second revision in case of missing information after in-meeting note taking, ensuring the picture completeness.

3.3 Data analysis

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14 Following the transcription of the interviews, a coding procedure was applied. This supported the categorization of the statements provided by the managers. Since this paper aims at responding to two different and complementary research questions, two separate coding procedures were applied.

The procedure takes advantage of Gioia et al. (2012)’s terminology as this methodology resembles their approach for qualitative data collection. Thus, I use the term “1st order concept” to indicate the actual sentences taken from the interview transcript. Then, “2nd order theme” refers to the broader, more abstract category which the 1st order concept refers to. Finally, “Aggregate dimension” embraces the 2nd order themes into a more general definition.

This protocol was applied twice to address each research question individually.

Although the coding scheme is attached to the appendix, Figure 1 below illustrates the derived categories for RQ 1 and Figure 2 refers to RQ 2.

2nd order themes

 Lack of employees commitment  Low workers independency  Gap Management-Employees

Aggregate dimensions

 Internal issues

 Communication with suppliers issues

 External issues

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15 These enlisted items are to be interpreted as follows:

 Internal issues. The ones regarding problems within the organization borders.

o Lack of employees commitment. It refers to the psychological bonding that employees perceive with the company.

o Low workers independency. It refers to the degree of independency of the employees observed by the organization. A high independent worker does not need constant orders but acts autonomously.

o Gap Management-Employees. The perceived unequal distribution of power between the figure of the manager and the shop-floor employee.

 External issues. The ones regarding problems outside the physical domain of the firm.

o Communication with suppliers issues. Issues experienced during the exchange of information and directives between the organization and suppliers. (e.g. quality issues, unclear specifications in the delivery notes from the suppliers)

 Practices adapted to the context

o Recruitment Policy. Guidelines about the selection process and recruitment.

o Training. It refers to how the knowledge and competences are transferred from the organization to the worker.

 Recruitment Policy  Training

 Interactions with employees  Communication with suppliers

 Adaptation to contingencies

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16 o Interactions with employees. It refers to the interactions between the Chinese employees and the Romanian company. These can happen directly (Romanian management-Chinese employees) or indirectly (Romanian employees-Chinese employees, e.g. feedback exchange between workers).

o Communication with suppliers. It refers to the interactions between the Romanian company and the Chinese suppliers.

The conceptual model below (Figure 3) depicts the relationship between the facility set-up, including several issues (e.g. the commitment of the employees) and the effectiveness of facility management practices. The research aims to shed light on the moderating effect played by culture. As previously stated, here the cultural factor is explained in terms of uncertainty avoidance and power distance.

Culture Uncertainty Avoidance Power Distance Facility set-up implementation (e.g. employees commitment) Effectiveness of facility management practices

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4. Findings

This section shows the outcomes of the

interviews.

4.1 Internal issues

4.1.1 Lack of employees commitment

As Hofstede (1980) warned, workers in low UA countries may exhibit a weak commitment to the organization. With the Chinese employees, this was the case.

As pointed out by the HR manager, it is not uncommon for companies moving to China to cope with the concern that workers might quit the job without even noticing, leaving the firm with the responsibility of finding a replacement.

This was one of the major worries for the HR Manager. As mentioned above, CSi is putting so many resources into the training of the workers and all its efforts could be frustrated by a behavior that some might label as unprofessional.

4.1.2 Low workers independency

CSi is currently operating through a system based on cellular manufacturing principles. In this particular configuration workers benefit from a higher degree of independency and flexibility. They are expected to perform their tasks actively by collaborating and exchanging opinions. However, in low uncertainty avoidance or high power distance populations e.g. China, people are not expected to proactively take initiative by giving suggestions or come up with improvement directed ideas. Therefore, the effectiveness of cellular manufacturing might fall short and the benefits coming from a climate founded on open discussion and feedback exchange might be lacking.

“

They go home for the new year and you are not sure if they will come

back

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4.1.3 Gap Management-Employees

As reported so far, each issue encountered was stemming from culturally different behaviors related to how a population finds itself at ease with unclear situations. However, China significantly differs from Romania when referring to power-distance. In fact, in the Chinese culture the perceived gap between hierarchical levels is more emphasised than in the Romanian society. CSi Romania’s management closely worked with the Chinese counterpart in setting up PAC China and thus the necessary multiple interactions gave them the opportunity to face a different management approach.

The first close encounter with power-distance misalignments was experienced during the very beginning of the establishment process in China. Specifically, during the construction of the building itself. Incredibly, it appeared that the construction company appointed to build the facility did not provide it with restrooms. Indeed, it did not believe them as necessary for the shop-floor employees that can keep their physical needs within their dorm borders.

This marked certainty of inequality between upper levels and workers emerged also when the two HR managers had to decide on the number of benefits and vacation days. Indeed, the Chinese management was extremely surprised in hearing that it will have the same days-off as the welder operator.

In addition, as already mentioned workers from China are usually coming from far locations and thus they have to be provided with accommodation, often in the form of dormitories where most of workforce inhabits. In searching for it, the solution found by the Chinese management was to squeeze twelve operators into one small room, without any regards for the inhabitants’ conditions.

4.2 External issues

4.2.1 Communication with suppliers issues

“

The first delivery is perfect, and then the second one is not just a bit worse but

completely overlooked. You need communication, emails, calls. They don’t pay

attention. We have to ask for pictures, what kind of documents are used for

quality checks, reports from welding, tell me more about the process

”

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19 In line with all the considerations made so far in matter of uncertainty avoidance and the organization of shop-floor operations, complications arose in the raw materials procurement. All the following issues emerged due to the lack of strict directives contracts-wise with suppliers. CSi realized that with each transaction taken place with China-based suppliers implies constant monitoring and feedback communication between the parties. If immediate and continuous responses are not given regarding quality and others and thus leaving the supplier with more autonomy and decision-power, several complications arise.

Starting with quality issues, CSi noticed that if all the parameters of an order are not specified in detail, then the quality of the next order is completely overlooked. This results in time-consuming and frustrating calls to renegotiate the agreements with suppliers and sometimes requiring the intervention of the top-management.

While these problems were manifesting with obviously unmatched quality standards and confusing delivery notes, this cultural-based comfort of working in unclear situations mirrored also in the relationship with suppliers. Indeed, CSi learned that if it does not give all the inputs to the workers than it will not receive any output. Similarly, the supplier does not share ulterior information if not asked. Specifically, the Romanian Logistics Manager found only at a later stage that some of the parts the supplier was buying and delivering to the Chinese facility were retrieved from Europe, extending the delivery time by two weeks. The problem stemmed from a lack of transparency in the supplier’s modus operandi.

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4.3 Adaptation to contingencies

As a result from the coding of the interviews, the following represent the contingent approach that had to be adopted in response to the context.

4.3.1 Recruitment Policy

A change of the recruitment policy was one of the first ones to be introduced. Workers in China might come from even the most remote corner of the country and CSi thought that by limiting the search for applicants to just the closest cities would reduce the risk of short-term experiences related to low commitment.

Nonetheless, the education level in China is not up to companies’ standards and thereby a shorter radius of recruitment substantially limited the source of qualified trainees.

A different approach had been used for the recruiting phase as well. Firstly, CSi looked for higher educated employees even if the task they will perform does not require a strong technical background. This expedient is expected to reciprocate by creating a team of independent and flexible workers. Finally, “Self- Responsibility” is one of the skills enlisted in the job description.

“

We gave them the minimum requirements that have to be specified in the

delivery note. We agreed to have article number, drawing number, etc. They not

only didn’t put all the 10 items we specified, not even 5! But none or maybe in

Chinese!

”

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4.3.2 Interactions with employees

Among the practices used to foster the commitment, the future workers are required to sign an agreement in which they acknowledge the efforts made by the company in giving them the necessary training as well as its investments and expectations. Moreover, they built a climate of openness and free flow of opinions by fostering group discussions and feedback exchange. However, this more “friendly” approach will take a while to fully setting in because of the above-mentioned perceived gap between operators and management.

Further, Romanian personnel are to be sent to the foreign factory for longer periods in order to provide real-time support.

Finally, the company assigned clear responsibilities and defined roles to each individual. This is going to increase the awareness of the employees regarding their radius of competence when operating.

Regarding the actual shop-floor dynamics in China, the factory has been equipped with physical representations that visually illustrate the detailed steps to take during the assembly. Indeed, due to the evident communication misunderstandings faced, the management decided to adopt a more practical and immediate means of teaching. The presence of visual aids around the Chinese site will prevent the workers from being asked to individually take initiative when in doubt during their daily shift.

Furthermore, the HR manager prepared a manual of instructions to be distributed to give them ulterior “off-line” support.

4.3.3 Training

“

We decided that everybody will come to Romania and work in this environment

and also spend time in the other departments not just theirs, so they can

understand the process as a whole. We will also send somebody from here to

work there for 1-2 years so they have constant control and feedback”

”

HR Manager

“

If the boss says something they say yes no matter if it’s good or not. We encourage

them in group discussions. For instance our COO constantly asks for their opinion.

“Okay this is my opinion but I want to know yours. Let’s talk about it”

It’s a different management approach

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22 With these issues of lower autonomy in mind, CSi rethought the training protocol.

Indeed, each one is cross-trained so as to be able to perform a variety of tasks other than his own. The aim is to give them a complete picture of how the entire production and assembly process work and thus fostering an atmosphere of team working.

4.3.4 Communication with suppliers

Given the difficulties faced with suppliers, CSi went for a different approach compared to its European sources. In fact, the company wants to be fully informed on the production process of the materials that have to be sourced elsewhere. The strategy pursued so far consists of providing CSi itself with documents used for the quality checks, followed by pictures of the purchased parts and updated reports from e.g. the welding.

Regarding the issues faced with the inbound receiving of materials, CSi started to indicate all the required specifications both on the Purchase Order and on the delivery note. However, this step must be always carefully monitored since a “one-time warning” proved to be ineffective. In short, low uncertainty avoidance calls for rigid and timely monitoring, as the suppliers located in these countries are not used to keep a linear and predictable behavior in business relationships.

4.3.5 Unchanged approach: Loyalty to the original company values

If for most of the points CSi had to adjust its approach due to evident complications, for some of the issues the company simply remained loyal to its management philosophy. Specifically, all the incomprehension generated by power distance differences were solved by staying with the Romanian flat perspective of hierarchies. Therefore, all the propositions above enlisted that were neglecting the humanity principles were rejected and the firm continued its administration based on equality. Therefore, the building was revised and CSi policies adopted in Romania were handed down to the Chinese plant.

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23 Table 3: Summary of the findings

Cultural Domain Issues faced How CSi addressed this Category

Uncertainty Avoidance

Employees feel free to leave without notice

Look for people close to

the factory Recruitment policy

Put on paper the efforts and investments that CSi

is making for them. Employees have to sign

it. Interactions with employees Fostering a climate of collaboration by constantly engaging them in discussions and asking for their feedback

Interactions with employees

Low independency of employees. Need to specify the task

step-by-step

Visual aids around the factory (pictures that

illustrate how to perform the job)

Look for higher educated people, even if the task

does not require it—> higher independency

Recruitment policy

The focus of CSi changed from the “WHAT to do”

to “HOW to do it”

Training

Send Romanian workers to China for a while to

give them constant feedback

“Self-Responsibility” is one of the requirements

included in the job description

Recruitment policy

CSi clearly defined the responsibilities by assigning clear roles to

workers

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Employees are cross-trained so that they have

a complete picture of how the assembly is

done.

Training

CSi prepared a “Manual of instruction” for workers in the assembly

Training

Quality issues with suppliers. If CSi does not

explicitly monitor every shipment e.g. by

clarifying all the parameters in detail, then the quality of the next order is completely

overlooked.

CSi wants to be fully informed about the production process (i.e.

Ask for pictures of the parts, ask for which kind

of documents are used for quality checks, ask for reports from e.g. the

welding)

Communication with suppliers

Delivery notes are too simplified and this leads

to confusion when receiving goods. CSi is

not using a proper warehouse; all the products leave the supplier location and are

moved directly to the assembly area. Therefore, if the delivery

note is not complete then the operator cannot associate an order to the respective

machine.

CSi indicates all the required specifications both for the PO and the

delivery note (article number, project number, etc.). This must be constantly monitored

because most of the times, none of the requests of CSi are fulfilled resulting in faint

delivery notes with Chinese indications.

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Chinese suppliers were only looking at the final

product without mentioning the quality

and origin of components. The Logistics Manager found only at a later stage that

some of the parts bought from Chinese suppliers were coming

from Europe. They simply did not point that

out. This was increasing the lead-time by 2

weeks.

Still not solved. They have to agree on maintaining stocks. CSi is

prone to share the costs that this implies.

Power-Distance Chinese management expected a different number of vacation days

and benefits than shop-floor workers

Denied. Kept CSi system based on equality

Unchanged approach: Loyalty to the original

company values

Original facility built without toilets. The construction company did not believed them as

necessary for workers

Kept CSi system based on equality

company values

Chinese workers usually live far from the factory.

The company has to think about dorms. Management expected

12 people per room.

Kept CSi system based on equality. The rooms

are for 4 workers.

company values

5. Discussion

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26 This paper aims at giving insights on “how do uncertainty avoidance and power distance impact the facility set-up?”. The author did so by witnessing the attempt of establishing a new facility in an environment characterized by different cultural values. Following the interviews, two broad categories were identified, namely internal issues (e.g. cellular layout efficacy) and external issues (e.g. suppliers relationships). The former refers to the issues that the company had to deal internally, vice versa for the latter. The internal issues were sub-divided into “lack of employees’ commitment”, “low workers independency” and “gap management-employees”. The external issues comprised “suppliers quality issues”, “suppliers communication issues” and “suppliers document specifications issues”. I went through the findings by reporting actual considerations of the interviewees and highlighting the linkages between the problems faced and the cultural indexes of uncertainty avoidance and power distance.

Once the issues faced along the facility set-up were identified, I further answered the second question “What strategies can be used by companies to solve culture-derived issues when setting up a foreign facility?”. To address this, the study expands on the practices that the here-discussed organization had to revise according to the destination country. These were “recruitment policy”, “training”, “interactions with employees” and “communication with suppliers”. One category was labeled “unchanged approach: loyalty to the original company values”. It does not refer to particular strategies, but only to what was not adapted to the context (e.g. power distance misunderstandings).

The findings of the first research question are in line with Ho, Wang and Vitell (2012) as they showed that when expanding operations globally, national culture and geographic region play a role against the absolute standardization of input, output and skills. My results support and augment these findings by pointing at the precise issues that impeded the full replication.

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27 Regarding the second question, the adoption of training was one of the strategies mentioned by Dahr (2015) to solve issues related to commitment. Surprising is the special consideration given to the recruitment policy as well as the introduction of visual aids in the factory. The former aims at looking for individuals with features (e.g. self-responsibility) that may prevent issues caused by low UA (e.g. less efficacy of cellular manufacturing). The latter (i.e. visual representations) is conceived with the same purpose in mind, that is to compensate the constant need of precise directives and instructions from the side of a low UA shop-floor worker.

5.1 Theoretical contribution

These outcomes provide important contributions both for theory and practice. First, theory on the relevance of culture for international operations management is enriched with further proof. Following a still unexplored stream of research related to national culture and OM, this study sheds light on the complications that might arise in setting up a facility beyond the home-country borders. Furthermore, this work is grounded on the contingency theory as conceived by Sousa and Voss (2008) and defined OM practice contingency research. In fact, given the cultural context; it expands on the management approach that best suits the facility set-up process, which was not discussed yet.

5.2 Limitations

However, the results are bound to limitations that need to be taken into account. First, the number of interviews with exclusively Romanian managers was limited since a few members headed the expansion process to China. Second, the factory in China opened at the end of the research and thus, the author could not cover issues arisen after the allowed period. Third, even though the study was conducted in a Romanian facility with Romanian management, the ownership of CSi is Dutch. Therefore, the culture of the managers could have been disturbed by the management style typical of The Netherlands.

5.3 Practical implications

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6. Conclusion

The purpose of this paper was to gain more insights on the role of national culture when establishing a new facility in a foreign country. Setting-up a new plant is a long process that requires special attention when moving beyond the home-country borders as the destination region has different values and norms. National culture is here operationalized through the Hofstede’s measures of uncertainty avoidance and power distance. Indeed, these proved to be determinant in the single case study. Specifically, different values of these indexes conditioned the communication with the foreign employees and suppliers. Furthermore, the author reports the strategies that can be used to face culture-derived issues that stem from low uncertainty avoidance and high power distance.

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Appendix A: Guideline for interview questions

Name:

____________________________________________________________________________

Function:

____________________________________________________________________________

(Brief introduction to my research)

1) Could you please describe the role you have in CSi Romania?

2) Could you please elaborate on the tasks that you covered in the establishment of PAC

China?

3) Which issues/misunderstandings have you faced with the Chinese management?

4) Which issues/misunderstandings have you faced with the Chinese employees?

5) How did you deal with these problems?

6) Does PAC China differ from PAC Romania because of the issues you just mentioned?

7) This was your first attempt of opening a facility in a foreign country. What did you learn

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Appendix B: Coding procedure 1 (RQ1)

1st order concepts 2nd order themes Aggregate dimensions

“They go home for holiday and you don’t know if they come back. They have the new year, everybody goes home and you

don’t know if they come back”

Lack of Commitment

Internal Issues “One of issue is that they really do what

you tell them to..you have to tell them everything. Also they work a lot with images. You need to show them what to do so they can do it better, with pictures.”

Low independency

“I can say there were surprises on the side of the other officers. They have the same

number of vacations days?We kept our ideas.”

Gap Management-Employees “We didn’t have a toilet because the

construction company said it wasn’t necessary.”

“They build dorms for the workers but they put many people in one room” “For them, if you have a management function then you need everybody to see

that, you need your own office. That’s a prove that you have a function. If you sit with the others than you are equal to

them”

“The first delivery is perfect, or al least close to perfect and then the second one

is not just a bit lower but completely overlooked. You need communication, emails, calls. You have to ask for pictures, show me what kind of documents you use for quality checks, give me reports from welding..tell me more about your process”

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“You need to be very very clear because a lot of them are buying stuff from Europe. We set the delivery time to 6 weeks. They present you their factory and you are impressed, “we have 4000 people working

in 3 factories and etc..” For our product we use 5 different motors and when you go into details we found that 3 electrical components are not produced in China but Germany. So the LT changes from 6 to 8 weeks. Ok, it’s the first delivery but what next? I can’t afford to wait so long. They have to think on forecast and build stock and I’ll have less LT but they don’t think like that. They just say ok this is what we can do and you need to discuss and go to

higher levels of that company”

Communication with suppliers issues

“On delivery notes, they not only didn’t put all the 10 items we specified, not even

5, nothing or maybe in Chinese”

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Appendix C: Coding procedure 2 (RQ2)

1st order concepts 2nd order themes Aggregate dimensions

“We try to look for people close to the factory. In China they come from

all around the country, it can be from the opposite of China. We

don’t have that risk”

Limiting the radius of workers search

Recruitment Policy “We also look for higher educated

workers, not only people that can do according to instructions. We look

for people with higher independency, even if the task doesn’t require high education. “High independency”..that’s also the

profile our work..when they see the problem they have to think about

how to solve it.”

Need for a proactive attitute

“One of the main criterion when we selected people was self-responsibility so that the level has to be high..Not people that just waiting for directions by take initiative..”

Need for a proactive attitute

“When it comes to investments, the plan is to make them sign a paper that says that we invest on you and expect you to stay 1 year or so and if

you leave earlier you need to pay”

Encourage commitment

Interactions with employees “We will send somebody from here

to work there for 1-2 years so they have constant control and feedback”

Feedback exchange and support

“We don’t tell them WHAT to do but

HOW to do it” Different communication approach

“We’re trying to give responsibilities to each one of them so they understand their role and put them in a group context in which they can exchange ideas and make everybody understand who’s responsible for

what”

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“We encourage them in group discussions. For instance our COO, he constantly asks for their opinion “Ok this is my opinion but I want to know yours..Let’s talk about it”..It’s a

different management approach..We want each one to

express its opinion..”

Fostering discussion and feedback exchange

“We assigned them to a person that show them exactly what to do and

give them a manual that they can use when they go back, the assembly

manual”

Assistance

Training “We decided that everybody will

come to Romania and work in this environment and also spend time in

the other departments not just theirs, so they can understand the

process as a whole”

Cross training

“You need constant communication and monitoring. We ask for pictures, what kind of documents are used for quality checks, reports from welding, tell me more about your process.”

Constant exchange of information and monitoring Communication with suppliers “We gave them the minimum

requirements..this has to be specified in the delivery note ..We

agree to have article number, drawing number, etc.. but you need

Facility Copy-Paste