Master Thesis
Cultural Dimensions and New Public Management
University of Groningen
Faculty of Business and Economics
Master of Science in Business Administration
Specialization: Organizational & Management Control
Esteban Arias Maune
Korreweg 151 A
9714 AH-Groningen
Tel. 0621231203
ecuabusiness@hotmail.com
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Preface
This master thesis is the result of a research performed to finalize my master degree in the Faculty of Business and Economics of the University of Groningen. Inspiration for this thesis was found during the specialization course “Organization & Management Control”. First, I would like to thank God because he lighted always my way and gave me wisdom to make generally good decisions in live. Furthermore, I would like to thank my family and especially my father José Arias Osejo, who always provided me with the best education and gave me a great support. Because of his high professional success he is an example to follow. In addition, I would like to thank my supervisor Prof. Dr. Henk ter Bogt for our cooperation and his assisting during the writing of my thesis and the very useful feedback he provided me with. Finally, I would like to thank my supervisor Dr. Ben Crom for co-reading my thesis.
Yours sincerely,
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Abstract
Literature on New Public Management is very extensive. Indeed, during the 1990s, New Public Management has become a major academic industry across the world, filling book-shelves and websites. However, there is a lack of research about the reasons why NPM initiatives might be successfully implemented in some countries, while in other countries it might be more difficult to achieve regarding national culture. This master thesis will determine the influences national culture has over the introduction of NPM initiatives based on Hofstede´s cultural dimension model.
Keywords: New Public Management, Hofstede´s Cultural dimensions (Individualism vs.
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Table of Index
1. Introduction ... 5
1.1 Research Methodology ... 8
2. New Public Management ... 9
2.1 NPM Approach ... 9 2.2 NPM Characteristics ... 12 3. Culture... 17 3.1 Cultural Dimensions ... 18 3.1.1 Individualism vs. Collectivism... 22 3.1.2 Masculinity vs. Femininity... 23
3.1.3 Uncertainty Avoidance (strong versus weak) ... 25
3.1.4 Power Distance (large versus small) ... 26
4. Analysis... 27
4.1 NPM and Individualism/Collectivism ... 28
4.2 NPM and Masculinity/Femininity ... 31
4.3 NPM and Uncertainty Avoidance... 33
4.4 NPM and Power Distance... 36
5. Summary and Conclusions ... 39
6. Recommendations... 45
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1. Introduction
The first New Public Management (NPM) developments began in the late 1970s and early 1980s in the UK and in some municipal governments in the USA, especially because of the economic recession and problems with efficiency. The governments of New Zealand and Australia soon followed. It put the New Public Management reforms on the agendas of other countries as well. This makes NPM primarily a movement propelled by practitioners seeking to improve government and public administration practices (Groot & Budding, 2008, p.2). New Public Management is probably both a social movement and a subject of an “ideology”/”belief” in the academic study. Indeed, during the 1990s, New Public Management has become a major academic industry across the world, filling bookshelves and websites with writings and conference proceedings using the term in their titles (Hood, 2004, p.12554).
New Public Management developed in the late 1970s, after more or less similar initiatives in the USA such as Zero Based Budgeting (ZBB) and Management by Objectives (MBO), and indicates a renewed stress on the importance of management in public service delivery and also on economic rationalism. It emphasizes the fact that a market oriented management could improve quality and efficiency of public services. Therefore, according to Hall et al. (2003, p.495), NPM can be regarded as a collection of activities and measures designed to introduce an ethos of business management and entrepreneurship into the management and delivery of public services. New Public Management is an international phenomenon, where a greater emphasis is placed on judging performance in terms of the outputs and objectives achieved rather than by merely monitoring the processes employed. New Public Management has been denominated as a “post-bureaucratic” approach, as “managerialism”, and “market-based public administration”. Therefore, the most important key reform thrust are a greater focus on results and increased value for money, devolution of authority and enhanced flexibility, strengthened accountability and control, a client- and service orientation, strengthened capacity for developing strategy and policy, and introducing competition and other market elements (OECD, 1995, p.25). So, attention was focused on more “businesslike and professionalized” management of these organizations; Government organizations were decentralized and in some cases parts of them were privatized (ter Bogt, 2008, p. 31).
6 (Hood, 2004, p.12554). In addition, according to Hood (2004, p.12554), a key debate concerns how far or in what ways contemporary public management reforms represent convergence on some global paradigm. There seems to be little evidence that the application of reform strategies based on New Public Management actually leads to uniform and desired results. The effects and implications of NPM are often assumed or promised but not well documented. They are hard to measure and much debated (Christensen & Laegreid, 2001, p.74).
From previous research we know that the implementation of NPM reforms varies largely among nations and sectors (e.g., Hood, 1995, p.98). The OECD (1995, p.19) correctly observes that there is no single model of reform, there are no off-the-shelf solutions to the problems of the bureaucratic state; while according to Lynn (1998, p.12), the evidence strongly suggests that political origins of reform differ from country to country and, therefore, that administrative reform is, indeed, the reflection of the ongoing processes of nation-building.
Therefore, the implementation of the NPM is not always successful and one of the reasons for that might be that the cultural dimension is often overlooked in accounting for how and why organizations act and perform as they do (Grindle, 1997, p.482). Culture is important for many aspects of business life especially when a business must interface with people, either as customers, employees, suppliers or stakeholders. Cross-cultural research has had most value therefore when it has been able to provide substance to modern management practices and techniques (Jones, 2007, p.2). That is, cross-cultural research might contribute to explain why organizations perform and act as they do and might provide organizations tools to improve performance in the different cultures.
7 The most important researchers in cross-cultural studies are Hofstede and Trompenaars & Hampden Turner; however, Hofstede, a Dutch engineer and organizational psychologist, has had the major influence on inter-cultural studies worldwide. He identified in his model five dimensions of national culture; individualism vs. collectivism, masculinity vs. femininity, uncertainty avoidance, power distance, and long vs. short – term orientation. His model has become part of intercultural training programs and of textbooks and readers in cross-cultural psychology, organizational psychology and society, management and communications.
Cross-cultural studies are still going to be necessary in the future. Management in the 21st century will not be basically different from management in the 20th. In fact, similar management problems have existed as long as human societies have existed (Hofstede, 1999, p. 34). In order to implement new working methods in organizations or to create change, it is essential to change the corporate culture, and that is the reason why identifying the effect of cultural dimensions on introduction and functioning of the New Public Management is also important.
Because different countries face different problems and follow distinct ideas in responding to the characteristics of the New Public Management, the purpose of my thesis is to broaden the understanding of the relation between the national culture and the implementation of the New Public Management. The essence of culture is not what is visible on the surface (Trompenaars & Hampden-Turner, 1998, p.3). It is the way in which a group of people solves problems and reconciles dilemmas (Trompenaars & Hampden-Turner, 1998, p.6). I am from Ecuador, a masculine, collectivist, high-power distance, and high-uncertainty avoidance country. Thus, I am interested to know how NPM characteristics might fit, e.g. within Ecuadorian culture.
Therefore, my research question is:
Is a form of New Public Management adaptable to all national cultures?
To provide an answer to this research question, several sub-questions are formulated: Before answering the main research question, it is important to have a clear understanding about the relation between cultural dimensions and NPM. Therefore, the sub-questions are:
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- Which “values” on the Cultural Dimensions are more appropriate to realize a successful implementation of NPM?
In addition, to answer the main research question it is important to know if there are some NPM initiatives that are more likely to be adaptable to all cultures. Therefore, the sub-questions are:
- Is a form of NPM based on competition more adaptable to all national cultures?
- Is a form of NPM based on customer orientation more adaptable to all national cultures? - Is a form of NPM based on decentralization more adaptable to all national cultures?
This paper will discuss the research question on the basis of research of literature.
1.1 Research Methodology
Literature on New Public Management is very extensive. However, the literature search for my master thesis was conducted using internet databases for academic articles like EBSCOHOST, EmeraldInsight, and Science Direct. The initial search query was based on the key words “New Public Management” and “Characteristics”, “New Public Management” and “Experiences” and also independently as “New Public Management” and “Critics”. Nevertheless, the fundamental literature about NPM is Hood (1991) because he was the first researcher using this term.
Furthermore, also key terms used were “Cultural Dimensions”, “National Culture”, and “Organizational Culture”. However, Hofstede`s cultural dimensions are important because of his important contribution to cross-cultural studies.
Some important journals used were Financial Accountability & Management, Public Administration Journal, Public Management Review, and the Journal for Administration and Society, among others.
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2. New Public Management
In this chapter, New Public Management is explained in order to understand why NPM emerged and in order to know what the doctrines of NPM are.
2.1 NPM Approach
The New Public Management movement began in the late 1970s and early 1980s and its first practitioners emerged in the United Kingdom under Prime Minister Margaret Thatcher and in the municipal governments in the United States of America that had suffered from economic recession and tax revolts (Gruening, 2001, p.2).
The approach of the New Public Management was to replace the Classical and Neoclassical Public Administration, which had been developed in the late 19th and early 20th century in order to eradicate the problem of corruption and incompetence through efficiency (Schachter, 1989). The “new” element that was added by NPM was its focus on businesslike techniques, economic rationality, and economic efficiency. In addition, citizens become used to very rapid and customer-friendly services, which makes necessary to improve the standards of service of state institutions. What they especially added was a focus on analysis and a shift from a bureaucratic management style toward a more rational and analytic one (Gruening, 2001, p.5). That is, for instance, towards a more rational allocation of resources where the individual´s motive is taken for granted and not subject to ethical criticism.
For Weber (1947), the term bureaucracy was inseparable from the term rationality, which can be integrated to the concept of "rational bureaucracy". According to Weber, bureaucracy is a particular type of administrative structure developed through rational-legal authority. The features developed to make bureaucracies rational were e.g. the functional specialization, clear lines of hierarchical authority, and decision making based on rules. The traditional bureaucratic structures had few explicit rules, duties were delegated by leaders and changed at anytime, and had a diffuse structure in traditional authority, among others. Bureaucratic structures evolved from traditional structures with the following changes: Jurisdictional areas are clearly specified, organizations follows hierarchical principles, abstract rules govern decisions and actions, officials are selected on basis of technical qualifications, and the official is a full-time employee and looks forward to a life-long career within the organization.
10 measurement. Niskanen (1971) challenged the traditional view that monopoly bureaus are the best way to organize the public sector because most bureaus are too large, grow too fast, and use too much capital. Therefore, he suggested that competitive bureaus are the best way to perform operations such as delivering mail or running schools more efficiently. These are basic concepts of the characteristics of the New Public Management that will be discussed more in detail under 2.2.
Furthermore, extensive welfare state tasks that had considerably increased in the Western world after 1945, reduced financial latitude, economic structural crises, and the internationalization of public matters have put state administrators under reform pressure (Koenig, 1996, p.31).
According to Pollitt & Bouckaert (2004, p.27), one important reason to reform is the global economic factor because it is often said that the globalization of capital markets and the growth of multinational corporations and international trade have weakened the control national governments are able to exert over their economic policies. Therefore, it is complicated for a government to sustain for very long a level of public spending that global money markets deem imprudent. Economic globalization is a process involving a for-profit nexus (Elzinga, 2010, p.1).
We have to take into account that in an era of global economy, there are global economic pressures that cannot be controlled by governments. So, in this world of global economy, reforming governments will continue to focus on areas of influence, which is the public sector and means of making this part of the economy as efficient and effective as possible, which makes governments turn to NPM-like initiatives for solutions to public services delivery (Lapsley, 2008, p.77). Viewed from another perspective, the change that has been seen in public administration worldwide reflects the triumph of capitalism and market-based social allocation, indeed, of the global marketplace, over socialism and state-directed social allocation (Lynn, 1998, p.112).
11 According to Hood (2004, p.12554), the doctrines of the New Public Management include transparent management, pay for performance, and individual responsibility. Therefore, NPM focuses on the outcome and other performance indicators to guarantee effective and efficient performance for their expected results (ter Bogt and Scapens, 2009, p.3).
Nevertheless, some critics on the New Public Management are, among others, that the failure of its successful implementation in the different countries relies on the political control of public administration (Laurence, 1998, p.114). Some political actors might have, e.g. the intention of concentration of power, which might obstruct a public sector reform. Therefore, it is important to move toward modes of public management that support the rule of law, and transparent and accountable government, as well as a predictable legal framework with rules known in advance and a reliable and independent judiciary (Hope Sr., 2001, p.123). Apart from this, according to ter Bogt (2003, p.154), in Western European countries it seems to be doubtful whether economic efficiency is the first priority of politically governed organizations, seeing that it is questionable whether voters can or will really assess economic performances of government organizations. Thus, it is observed that in Western European countries citizens want government to be economically efficient, but on the other hand they also attach importance to equity, accountability, and authority, in addition to outputs and efficiency (ter Bogt 2003, p.154).
Furthermore, economic pressures do not themselves translate directly into some particular type of management reform. Reformers need ideas, model, patterns, or plans of how the public sector could be better organized. Markets may provide the pressure but they do not supply the ideas (Pollitt & Bouckaert, 2004, p.28).
Finally, identifying how managerialism varies cross-nationally is a key debate about how far or in what ways contemporary public management reforms represent convergence on some global paradigm (Hood, 2004, p.12554). According to the Organization for Economic Co-operation and Development (OECD), cited by Mathiasen (1999, p.91), there is no single best model of public management, and reforms must take into account national differences and local circumstances.
12 leadership, transparency, responsibility, efficiency and payment by results (ter Bogt, 2008, p. 31).
2.2 NPM Characteristics
After the beginning of the New Public Management movement in the late 1970s and early 1980s, it put NPM administrative reforms on the agendas of most OECD countries and other nations as well (Gruening, 2001, p.2). Later, academics identified common attributes of the public sector reforms in the different countries and organized them under the label of New Public Management (Dunsire, 1995, p. 21). The first academic using the term of NPM was Christopher Hood in his article “A Public Management for all Seasons?” (1991). The term New Public Management was coined because some generic label seemed to be needed for a general, though certainly not universal, shift in public management styles (Hood, 1995, p.94).
This new paradigm itself has been variously denominated. In addition to NPM, other terms like “managerialism”, “market-based public administration”, and “post-bureaucratic” label are used (Lynn, 1998, p.109).
I have used the framework of Hood (1991), together with the associated characteristics and doctrines because of the importance of this framework in the field of study. It is also going to be crucial to determine the adaptability of New Public Management within the different national cultures regarding their specific cultural dimensions.
The doctrines of the New Public Management are the following (see table 1).
Doctrines
1) Hands-on professional management in the public sector 2) Explicit standards and measures of performance
3) Greater emphasis on output controls
13 6) Stress on private-sector styles of management practice
7) Stress on greater discipline and parsimony in resource use Table 1. NPM Characteristics Hood (1991 pp.4/5)
Hands-on professional management in the public sector means an active, visible, and discretionary control of organizations from named persons at the top that are “free to manage” (Hood, 1991, p.4). That is, replacing the traditional “hands-off” management in which bureaucrats at the top of public-sector organizations are relatively anonymous and carefully fenced in by personnel management rules designed to prevent favoritism (Hood, 1995, p.97). Therefore, the interest in accountability within public sector has the purpose to make public sector managers more accountable for their decisions and actions. According to Hood (1995, p.96), accountability requires a clear assignment of responsibility and not a diffusion of power. In addition, he argues that because it implies more freedom to manage by discretionary power, some possible accounting implications might be e.g. a lower level of procedural constraints on handling of contracts, cash, and staff, coupled with more use of financial data for management accountability. However, there is empirical evidence that shows that there are deficits in accountability in the conduct of public affairs in countries that introduced the New Public Management. For instance, according to Therkildsen (2001, p.7), in some African countries the accountability problem is more complicated because of deficiencies in the political process itself. He argues that civil servants may have legitimate reasons to override the decisions of their opportunistic, self-serving and irresponsible political masters. In general, problems of accountability might arise, for example, when governments ignore or transgress social ethics and constitutional and legal provisions in conducting public affairs, activities are hidden, corrupt practices are widespread, or public participation in running public affairs is low (Therkildsen, 2001, pp.7/8).
Another characteristic of New Public Management are the explicit formal measurable
14 other performance indicators to guarantee of effective and efficient performance for their expected results (ter Bogt & Scapens, 2009, p.3).
However, newly-developed accounting instruments are not always actually used. For instance, in Dutch local government there was often a substantial gap between the desired formal accounting changes and the changes actually realized (ter Bogt, van Helden, 2000 p.277). In addition, fundamental changes in the accounting systems and other aspects of the control of an organization require thorough preparation, sufficient means, and close attention from the management and other personnel of the organization (ter Bogt, 2008 p.34). Politicians often lose interest in changes that do not quickly produce visible results because e.g. the critical attitude of many citizens and the fluctuating political preferences of the electorate, which makes politicians more uncertain and thus more impatient to do something (ter Bogt, 2008 p.40).
Greater emphasis on output controls are attempts to control public organizations in a more “homeostatic” style according to present output measures rather than by the traditional style of “orders of the day” coming on an ad hoc basis from the top (Hood, 1995, p.97). In the output-constrained style of performance evaluation, the main question is whether a professional manager or his/her department has kept within budgets formulated in quantitative terms and, in particular, has achieved previously agreed performances (output goals) for a short period of time, for instance, a year (ter Bogt, 2003, p.315). Input control, the preferred control mechanism in the traditional public administration, is argued to be inadequate because it conceals organizational slack and inefficiency and does not relate performance to demand and customer satisfaction. According to Pollitt & Bouckaert (2004, p.147), executive politicians have transferred their focus for control from inputs to outputs via processes. He argues that public service managers have experienced greater freedom to deploy their inputs but at the same time they have felt themselves under closer scrutiny than ever before as far as their results are concerned.
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Shift to disaggregation of units in the public sector means break up formerly “monolithic” units (Hood, 1991, p.5). According to Hood (1995, p.95-97), it means a shift towards greater disaggregation of public organizations into separately managed “corporatized” units for each public sector “product”. The justification is the need to create “manageable” units with separate provision and production interests and gain efficiency advantages of use of contract or franchise arrangements inside as well as outside the public sector (Hood, 1991, p.5) through decentralization. Decentralization, the delegation of authority or decision rights to managers, on the one hand, and the design of incentive systems to ensure that these managers do not misuse their discretion and are appropriately rewarded commensurate with the risk they bear, on the other hand, are two critical organizational design choices in an outcome control context (Merchant & van der Stede, 2007, p.27). To scholars and practitioners of New Public Management, decentralization means giving line managers in government departments and agencies greater managerial authority and responsibility (Polidano, 1999, p. 20). Hood (1995) stressed the focus on decentralization or pushing responsibilities down the line, as a key component of NPM. For instance, within provinces and municipalities, in most countries NPM reforms are supported by decentralizing executive tasks from the ministries to (semi-)independent entities or agencies (Groot &Budding, 2008, p.4). Examples of decentralized tasks are (parts of) regulation, management, service provision and policy advice (Pollitt and Bouckaert, 2000), cited by Groot &Budding (2008, p.4).
Another characteristic of the New Public Management is a shift to greater competition in
public sector; it means a more contract based competitive provision with internal markets and term contracts. It refers to a shift towards greater competition between both public sector organizations and between public sector organizations and the private sector (Hood, 1995, p.97). According to Hood (1995, p.96), rivalry is the key to lower costs and to improve standards. It replaces e.g. the traditional unspecified employment contracts and open-ended provisions and the focus is on identifying costs and understanding cost structures. So, cost data become commercially confidential and cooperative behavior becomes costly. The OECD summarizes these attempts as the aim to make the public sector more competitive while, at the same time, trying to make public administration more responsive to citizens’ needs by offering value for money, choice flexibility, and transparency (OECD, 1994).
16 cash accounting by accrual accounting principles for financial reporting purposes. Accrual accounting is a basis of accounting under which transactions and other events are recognized when they occur, and not only when cash or its equivalent is received or paid (Groot &Budding, 2008, p.8). So, it is expected that managers should be responsible for all costs associated with the outputs produced and accruals allow for the capture of full costs, supporting the decision making by managers. Most countries have introduced at least some elements of accrual accounting by now and remaining examples of pure cash based reporting have become scarce (OECD, 1994).
Nevertheless, competition within public organizations and the private sector might have some disadvantages. In Western societies, public agencies are often created under the guise of addressing market failure and are maintained to contribute to the common good (Matthews & Shulman, 2005, p.233). Because public organizations are created to fulfill responsibilities of government and to delivery services, governments might restrict and/or distort competition e.g. by adopting procurement practices of restricting participation of private organizations. In addition, because public organizations are not driven by a desire of profit maximization, they might not be very effective in exercising their “buyer power” and therefore public organizations might not be really competitive in costs.
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Stress on discipline and parsimony in resource use means a move towards an active search for finding alternative, less costly ways to deliver public services, instead of laying the emphasis on institutional continuity (Hood, 1995, p.97). It involves e.g. cutting direct costs, raising labor discipline, and less job security (Hood, 1995, p.96). So, NPM is also very much focused on rational management and increasing economic efficiency and effectiveness (ter Bogt, 2008, p. 33). This might lead also to downsizing, that is, to rationalizing the public sector in order to achieve a smaller and more cost-effective public service. However, it might cause resistance of public sector unions, especially in countries with a high level of government intervention in the economy to guarantee employment. Those countries, like Greece, have a high level of public sector employment and therefore, the resistance to downsizing might be higher. In addition, in many crisis states in Africa, like Ghana or Uganda, downsizing has not led to expected budget savings because of the high cost of compensating those retrenched (Larbi, 1999, p.20). Also, Larbi (1999, p.20) argues that quantitative reductions in employment did not lead to qualitative improvement in services because the initial wave of reforms did not pay much attention to staff morale, capacity building and other efficiency and productivity improvement measures.
After this introduction of New Public Management, several of its characteristics, and some experiences with NPM, the next chapter will discuss “culture”.
3. Culture
This chapter will deal with culture and in particular with cultural dimensions. It is important for my thesis to understand what culture is about, how it is understand and what specific characteristics Hofstede´s cultural dimensions have.
18 For Trompenaars & Hampden-Turner (1998, p.20-28), the essence of culture is the sets of values people share within their culture. People from the same culture have their own sets of values which are rooted strongly in their attitudes and beliefs, so that it is impossible for them to thoroughly understand other cultures. For that reason, it is possible to determine the principal values of the different cultures. In that sense, cultures are objectively identifiable and well-defined entities which may be compared (Holden, 2002, p.27).
3.1 Cultural Dimensions
Hofstede created originally four cultural dimensions, the ones used in this paper. He did his research during the time he was working on IBM and analyzed over 60.000 responses to 116.000 questionnaires to a survey from over 66 countries. The first publication of his results was done in his book “Culture´s consequences: International differences in work-related values”, in 1980.
Hofstede´s analysis consisted of four different aspects of national culture. He called those different aspects “dimensions”, which are not inter-dependent and can occur in all possible combinations. The four cultural dimensions of Hofstede are:
- Individualism versus Collectivism - Masculinity versus Femininity
- Uncertainty Avoidance (strong versus weak) - Power Distance (large versus small).
After that he created a fifth dimension, called “Long versus Short Term Orientation”, which was originally “Confucian Dynamism” (Hofstede, 1994, p.5). It was “discovered” in a study in which students answered a questionnaire created by Chinese scholars. Short Term Orientation is associated with fulfilling social obligations and respecting tradition, Long Term Orientation is associated with values such as perseverance. I will not deal in my analysis with this dimension, but only with the original four ones, because scores on the last dimension were obtained in only 23 countries and there has been insufficient research as yet on the implications of differences along this dimension to allow the composition of a table of differences (see e.g. table 2) in the family, the school and the work place, similar to those for the other four dimensions (Hofstede, 1994, pp.5-6).
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- Universalism versus Particularism (rules versus relationships)
- Communitarianism versus Individualism (the group versus the in individual) - Neutral versus Emotional (the range of feelings expressed)
- Defuse versus Specific Cultures (the range of involvement) - Achievement versus Ascription (how status is accorded) - Human-Time relationship (attitudes to time)
- Human-Nature relationship (attitudes to environment).
However, I will not deal with Trompenaars and Hampden-Turner dimensions in my thesis because I agree with Hofstede (1996, p.191), that it confuses the individual with the country level of analysis. Trompenaars concluded that the nine countries studied in his research could be divided into two types: “Left Brain” countries like USA or the Netherlands are at the same time e.g. universalist, individualist, neutral (not emotional or affective), and specific (e.g. prone to criticize people directly), and “Right Brain” countries like Venezuela or Spain are the opposite. Trompenaars & Hampden-Turner (1997, p.150-151) argue that dimensions are mutually exclusive or at least mutually subtractive. Therefore, countries might have the same propositions but different countries resolve this dilemma in opposite sequences with different priorities. That is, countries might have the same propositions but they deal in a different way with those propositions and have also a different “chronogram” in dealing with those propositions. Nevertheless, individual-level, organization-level, and country-level correlations are all different things. Distinguishing between these levels is an essential condition for cross-cultural research (Hofstede, 1996, p.191). We assume at the individual-level that individuals have a certain mental programming and therefore, we would expect a certain behavior in certain circumstances. However, at country-level the behavior might be different because of e.g. economic pressures, political tendencies, and external influences. Furthermore, I consider that the dimensions of “Communitarianism vs. Individualism” seem to reflect closely the Hofstede dimensions of “Collectivist vs. Individualism”, and “Achievement vs. Ascription” seem to reflect Hofstede`s “Power Distance”, especially if status is accorded by nature.
cross-20 cultural management as a form of knowledge management. He felt that apart from changes in the political environment, in the economy, and in the more complex multinational and multicultural involvements, values in the work place have also experienced changes e.g. organizations emphasise trans-national cooperation and encourage empowerment. Therefore, he suggested that those changes require a new way of looking at things (Holden, 2002, p.303). This he tried to achieve by developing the notion of culture as an object of knowledge management to show how culture can be understood as an organizational resource. Holden (2002, p.99), defines culture as "varieties of common knowledge; infinitely overlapping and perpetually redistributable habitats of common knowledge and shared meanings." Common knowledge, in turn, is described as knowledge which is available in one location in an internationally distributed organization and which through interactive translation can be diffused to other locations within the organization in an appropriately intelligible form. Common knowledge is useful because there are different kinds of it, but it is dispersed messily both through organizations and the wider networks which encompass their stakeholders” (Holden, 2002, p.315). The new conceptual framework for cultures conceived in this way is provided by knowledge management, the transfer and sharing of knowledge and experience is conceived primarily in terms of collaborative learning where participants can draw from pools of common knowledge. Holden stresses that his new approach to cross-cultural management is basically derived from empirical research. Rather than test hypotheses, he has tried to answer questions which emerged in the course of his investigations and observations in global companies. Holden´s knowledge management is useful to determine how an organizational culture might be transferred into organizations within other cultures, however, Hofstede´s cultural dimension model determines the “roots” of a society culture and how this might influence a society behavior.
Furthermore, according to Hofstede (2002, p.1356), the five standard criticisms of his approach are:
1) Surveys are not a suitable way for measuring cultural differences. 2) Nations are not the best units for studying cultures. 3) A study of the subsidiaries of one company cannot provide information about entire national cultures. 4) The data obtained in IBM are old and obsolete. 5) Four or even five dimensions are not enough.
21 Furthermore, he argues that since the initial creation of the dimensions they have been validated against all kinds of external measurement and even recent replications show no loss of validity. Regarding the fact that the data was obtained from IBM, Hofstede argues that the dimensions found are assumed to have centuries-old roots and that only data which remained stable across two subsequent surveys were maintained. He emphasizes the fact that differences between national cultures with very well matched samples of a large sample size were measured. Finally, concerning the criticism that four or five dimensions are not enough, he argues that any additional dimensions should be both conceptually and statistically independent from the original ones and should be validated by significant correlations with conceptually related external measures (Hofstede, 2002, p.1356). I think that identifying more reliable dimensions to synthesize major distinguishing aspects of culture might be a major contribution to cross-cultural research. However, I also consider that the four or five cultural dimensions of Hofstede represent fundamental “pillars” in cross-cultural research, which easily allows distinguishing the members of one human group from another.
A reason one can imagine why Hofstede´s cultural dimensions are not going to have a great impact in the future anymore regarding cross-cultural management is the fact that the actual global economic inter-connectivity might lead to a cultural convergence. However, despite the actual globalization era, values are cultural and resilient against technological influences (Tjosvold & Leung, 2003, p.34). In addition, many problems in modern management are not so modern at all; they are basic human dilemmas, and every generation anew has had to cope with (Tjosvold & Leung, 2003, p.32). So, we can understand that although people are cross-culturally interconnected, and financially and economically interdependent, people are always going to have an intra-cultural collective programming of the mind that is going to distinguish one culture from another.
22 behavior is an attractive area of study. However, my focus is not on individuals and specific organizations, but on the chances of “successful” implementation of New Public Management initiatives regarding societal culture in a certain country.
Hofstede´s contribution to the cross-cultural research has created a new perspective in international management. The cultural dimensions have become part of intercultural training programs and of textbooks and readers in cross-cultural psychology, organizational psychology and society, management and communications (Hofstede, 2002, p.1356). Applying those studies to the implementation of New Public Management and its characteristics in a certain country, i.e. culture, is in my view crucial to assert its success, or to determine which problems in its implementation could be predictable now and in the future. Hofstede´s dimensions may help us understand why what appears to be exactly the same reform, may be very differently received in different cultures (Pollitt & Bouckaert, 2004, p.55). We have to remind here, as observed above, that NPM is not really a uniform concept. So, in order to obtain an idea of the chances for a “successful” implementation of an NPM-like initiative, we have to focus on the specific characteristics of that New Public Management initiative. This thesis will first discuss now what Hofstede means with each of his four cultural dimensions.
3.1.1 Individualism vs. Collectivism
For Hofstede (1983, p. 44), the most important issue involved in this dimension is the relationship between an individual and his or her colleagues, or more in general, his or her “social group”. On the one extreme side of the scale, there are societies where everybody looks for his/her own interest, the ties between individuals are very loose. On the other
extreme side, there are societies were people look only for the interest of his/her group. Here, the ties between individuals are very tight.
23 Furthermore, this dimension indicates whether people prefer to work alone or in groups. For instance, USA measures the lowest on this scale; it means that in this country people generally prefer singular rather than collective achievement. This comes from a cultural upbringing which expects people to be independent at a very early stage (Jones, 2007, p.4).
Table2. Characteristics Individualism/Collectivism Hofstede (1994, p.3)
Collectivist societies Individualist societies
In the family:
• Education towards "we" consciousness • Opinions pre-determined by group • Obligations to family or in-group:
- Focus on harmony - Focus on respect - Focus on shame
• Education towards "I" consciousness • Private opinion expected
• Obligations to self: - Focus on self-interest - Focus on self-actualization - Focus on guilt
At school:
• Learning is for the young only • Learn how to do
• Permanent education • Learn how to learn
At the work place:
Value standards differ for in-group and out-groups:
• Other people are seen as members of their group
• Relationship prevails over task • Moral model of employer-employee
relationship
Same value standards apply to all:
• Other people seen as potential resources • Task prevails over relationship
• Calculative model of employer-employee relationship
3.1.2 Masculinity vs. Femininity
24 men or for women, vary considerably from one society to another. Some societies make a sharper division between what men should do and what women should do than others. Societies with a maximized social sex role division have been termed masculine and those with a relatively small social sex role division feminine (Hofstede, 1983, p. 45). It has also to do with the differentiation between “masculine values” and “feminine values”.
In masculine societies, the traditional masculine social values permeate the whole society, even the way in which the women think. They include the importance of performing, of achieving something visible, of making money, among others (Hofstede, 1983, p.46). Furthermore, in feminine societies the dominant values among both the men and the women are more those which in the Western world are traditionally associated with the feminine role in society. Those values include not showing off, putting relationships with people before money, caring about the quality of life, helping others, in particular the weak, among others (Hofstede, 1983, p.46).
So, we can assess that feminine societies are more focused on social commitment and welfare. For instance, Sweden and Norway rank the highest on Hofstede´s scale showing that they are feminine oriented societies (Jones, 2007, p.4).
Table3. Characteristics Masculinity/Femininity Hofstede (1994, p.4)
Feminine societies Masculine societies
In the family:
• Stress on relationships • Solidarity
• Resolution of conflicts by compromise and negotiation
• Stress on achievement • Competition
• Resolution of conflicts by fighting them out
At school:
• Average student is norm
• System rewards students' social adaptation • Student's failure at school is relatively
minor accident
• Best students are norm
• System rewards students' academic performance
25 At the work place:
• Assertiveness ridiculed • Undersell yourself • Stress on life quality • Intuition
• Assertiveness appreciated • Oversell yourself
• Stress on careers • Decisiveness
3.1.3 Uncertainty Avoidance (strong versus weak)
The third dimension in Hofstede´s cultural dimension model is uncertainty avoidance. According to Hofstede (1983, p. 45), uncertainty always exists because the future is unknown and will always be so. There are some societies that “teach” their people to overlook this uncertainty and not to worry about it; people in those societies will take risks rather easily. Because people in such societies have a natural tendency to feel relatively secure, those societies are weak-uncertainty avoidance ones.
On the contrary, other societies “teach” their people not to try to beat the future. The future remains essentially unpredictable, it causes anxiety and people are not ready to take risks easily. Those strong-uncertainty avoidance societies also create many institutions to provide security and avoid risk, like an extremely number of laws and rules for example. Therefore, individuals in strong-uncertainty avoidance societies feel uncomfortable when the situation they face is ambiguous (Merchant & van der Stede, 2007, p.729). Countries with a relatively high uncertainty avoidance index are for instance Ecuador, Brazil, Spain or Japan, while countries with a relatively low uncertainty avoidance index are for example Denmark, Sweden, Britain or the USA (Hofstede, 1983, p.45).
Table4. Characteristics Weak/strong Uncertainty Avoidance Hofstede (1994, p.4)
Weak uncertainty avoidance societies Strong uncertainty avoidance societies
In the family:
• What is different, is ridiculous or curious • Ease, indolence, low stress
• Aggression and emotions not shown
• What is different, is dangerous • Higher anxiety and stress
26 At school:
• Students comfortable with:
- Unstructured learning situations - Vague objectives - Broad assignments - No time tables
• Teachers may say "I don't know"
• Students comfortable with:
- Structured learning situations - Precise objectives - Detailed assignments - Strict time tables
• Teachers should have all the answers
At the work place:
• Dislike of rules - written or unwritten • Less formalization and standardization
• Emotional need for rules - written or unwritten • More formalization and standardization
3.1.4 Power Distance (large versus small)
27 Table5. Characteristics High/Low Power Distance Hofstede (1994, p.2)
Low power distance societies High power distance societies
In the family:
• Children encouraged to have a will of their own
• Parents treated as equals
• Children educated towards obedience to parents
• Parents treated as superiors
At school:
• Student-centered education (initiative) • Learning represents impersonal "truth"
• Teacher-centered education (order)
• Learning represents personal "wisdom" from teacher (guru)
At work place:
• Hierarchy means an inequality of roles, established for convenience
• Subordinates expect to be consulted • Ideal boss is resourceful democrat
• Hierarchy means existential inequality • Subordinates expect to be told what to do • Ideal boss is benevolent autocrat (good father)
4. Analysis
28 4.1 NPM and Individualism/Collectivism
For Hofstede´s cultural dimension “Individualism vs. Collectivism”, the most important issue involved is the relationship between an individual and his or her colleagues, or more in general, his or her “social group” (Hofstede, 1983, p. 44). This dimension is related to the New Public Management characteristic of having more emphasis on “Hands-on professional management” in the public sector. A move towards more active control of public organizations by visible top managers wielding discretionary power is correlated with the predisposition of individuals to take full responsibility by their own. In addition, this cultural dimension is related to the explicit standards and measures of performance owing to the fact that self-management by professionals is replaced by performance indicators and audits (Hood, 1995, p.96), which enlarges on individual´s accountability. Finally, private–sector styles of management practice are related to Hofstede´s “Individualism vs. Collectivism”. A “successful” shift towards e.g. individual rewards may vary depending if societies are loosely integrated or tightly integrated.
29 depending on his group (conformity), obedience and loyalty. Park (2003, p.36), argues that acquiescence and loyalty is often needed to attain conformity, which makes criticism, opposition, and whistle-blowing more difficult in a collective culture. Therefore, the implementation of the New Public Management-like initiative of “Hands-on professional management” in the public sector, although apparently more necessary in collective societies in terms of accountability and corruption combat, might be more difficult.
Explicit formal measurable standards and measures of performance and success are necessary to have a clear statement of what the organization (public) wants to achieve. It means a definition of goals, targets, and indicators of success, preferably expressed in quantitative terms, especially for professional services (Hood, 1991, p.4). In Western management literature it is assumed that employees´ performance will be improved if they receive direct feedback about what their superiors think of them, which may well be the case in individualist cultures (Hofstede, 1994, p.7). However, according to Hofstede (1994, p.7), in collectivist countries such direct feedback destroys the harmony which is expected to govern interpersonal relationships. He argues that it may cause irreparable damage to the employee´s “face” and ruin his or her loyalty to the organization. For instance, Ecuador has a relatively low degree of individualism (ITIM, 2003), which might influence the way employees receive feedback about what their superiors think of them. However, to improve employees´ performance within public institutions in cultures with a very high degree of collectivism, like Indonesia (Cheung & Chang, 2008, p. 227), feedback should rather be given indirectly via a person trusted by both superior and employee, for example.
30 can be characterized as hybrid stakeholders, partly residual risk bearers and partly input suppliers of strategically highly relevant resources (Royer et al., 2008, p.243). Employees from collectivist cultures tend to have a more emotional dependence on, and a perceived moral involvement with, the organization, and practices and behaviors are premised on a sense of loyalty and duty binding the individual to the organization (Hofstede, 1980, p. 166). According to Hofstede (1980, p. 166), members of individualist cultures tend to be emotionally independent from the company, their involvement with the organization tends to be calculative, and work-related practices and behaviors tend to allow for individual initiative and expression, which is more the tendency of the NPM.
In general, in the case of individual performance dependent rewards, we might expect that it would accentuate interpersonal differences and might cause interpersonal rivalry. We may expect than that it is especially appropriate for individualist countries like the USA or Australia. For Ecuador, a country with a relatively high degree on collectivism (ITIM, 2003), equal distribution of rewards and non-performance related pay may be more accurate.
In conclusion, “Individualism vs. Collectivism” as a cultural dimension is the degree to which individuals are integrated into groups. It is related to the New Public Management initiative of “Hands-on professional” management in the public sector, which gives managers more freedom to manage by discretionary power. At the same time, public sector managers are more accountable for their decisions and actions. More freedom to manage might lead to misuse of entrusted power for private gain, which has been defined as corruption. Collectivist societies do not see legal norms as universal; on the contrary, individualist societies hold the view that laws and rights should be equal for all people within a country. Therefore, we would expect that the introduction of the NPM-like initiative of more discretionary control of organizations by managers, although apparently more necessary in collective societies in terms of accountability and corruption combat, might be more difficult.
In addition, explicit formal measurable standards and measures of performance and success are necessary to define goals, targets, and indicators of success. Direct feedback about what superiors think of employees to improve employees´ performance is in Western management literature assumed to be the case, the more because this literature often implicitly focuses on individualist countries. On the contrary, in collectivist countries such direct feedback might destroy the harmony. Therefore, to improve employees´ performance within public institutions in collective societies, feedback should rather be given indirectly via a person trusted by both superior and employee.
31 incentive systems to stimulate managers to perform better. However, individual performance rewards might create rivalry among employees, which may be especially appropriate for individualist countries. In collectivist countries, equal distribution of rewards may be more accurate.
4.2 NPM and Masculinity/Femininity
Hofstede´s dimension of “Masculinity vs. Femininity” indicates the extent to which dominant values in a society tend to be assertive and look more interested in things (masculinity) than in the quality of life and social commitment (femininity). This dimension is related to the NPM characteristic of “Hands-on professional management” in the public sector owing to the fact that giving managers more freedom to manage by discretionary power might be differently “successful” in cultures where individuals are ambitious than in cultures where individuals are modest. In addition, this dimension is related to the stress on private-sector styles of management practice. Regarding incentive systems, a great differentiation can be made between individuals that are focused on their careers and monetary incentives and individuals that are focused on quality of life and non-monetary incentives. Finally, Hofstede´s dimension of “Masculinity vs. Femininity” is related to the NPM characteristic of having a greater emphasis on output controls. Here we can distinguish in which type of cultures this NPM-like initiative might be more accurate regarding individuals desire for achievement.
32 societies, it is not difficult to understand why these societies have high corruption cases (Cheung & Chang, 2008, p. 236). For instance, Ecuador has a relatively high level of masculinity (ITIM, 2003) and has a higher level of corruption that e.g. Denmark (Dreher et al., 2007, p.456). Denmark, which is a society with a very high femininity index (Hofstede, 1983, p.46), is one of the less corrupt countries in the world (Dreher et al., 2007, p.455). We might expect that in countries with a high masculinity index, the New Public Management initiative of “Hands-on professional management” in the public sector might be more difficult to implement regarding the level of corruption. However, there are other variables that also influence the existence of corruption within a society like political, judicial, historical, and economic factors. In addition, the development of a country is another factor of influence, especially because corruption varies inversely with development (Dreher et al., 2007, p.450). For instance, Japan has a very high masculinity index (Hofstede, 1983, p.46), but at the same time Japan has a low level of corruption (Dreher et al., 2007, p.457).
Stress on private-sector styles of management practice is another NPM initiative that is related to Hofstede´s cultural dimension of “Masculinity vs. Femininity”. This NPM-like initiative replaces the traditional public sector ethics of e.g. fixed pay and hiring rules, the centralized personnel structure, and the habit to have a lifelong job (Hood, 1995, p.96). Concerning the rewarding systems according to performance within New Public Management, we might expect that in general, high masculinity societies prefer monetary rewards tied to performance and are therefore more tied to the NPM approach. Masculine societies emphasize the importance of making money, while feminine societies put relationships with people before money (Hood, 1983, p.46). For instance, we might expect that in Ecuador, a country with a relatively high level of masculinity (ITIM, 2003), monetary rewards might be more accurate than for e.g. the Netherlands. The Netherlands have a very high level of femininity (Cheung & Chang, 2008, p. 227) and we might expect non-monetary rewards to be more appropriate, e.g. recognition and a better work environment. However, there are also exceptions. Monetary rewards tend to introduce or accentuate pay differences across co-workers, which is inconsistent with high collectivism cultures. For instance, high masculinity countries like Japan are predicted to have a higher preference for team-based rewards owing to their more collective culture (Chow et al., 1994, p.389).
33 procedures (Hood, 1991, p.4). Masculine cultures are focused on achievement and competition, while feminine cultures do not stress on achievement (Hofstede, 1994, p.4). In masculine cultures, employees´ desire for achievement and competition permits a stronger focus on performance and performance evaluations (Merchant & van der Stede, 2007, p.730). Therefore, we can expect that the adaptability of the NPM-like initiative regarding the focus on output controls might be higher in masculine societies. For instance, a country with a high index of masculinity like Ecuador might be more receptive to a Management Control System emphasizing output performance than a country with a high index of femininity like the Netherlands.
In conclusion, “Masculinity vs. Femininity” is a cultural dimension that refers to the distribution of roles between genders. The assertive pole has been called "masculine" and the modest, caring pole "feminine". It is related to the New Public Management initiative of “Hands-on professional” management in the public sector, which gives managers more freedom to manage by discretionary power. Individuals in masculine societies are less benevolent and see economic growth as more important than, e.g. the conservation of the environment, in comparison to people in feminine cultures, which might lead to higher levels of corruption. Therefore, we might expect that in countries with a high masculinity index, the New Public Management initiative of “Hands-on professional management” in the public sector might be more difficult to implement.
Furthermore, stress on private-sector styles of management practice means the need to apply proven private sector management tools in the public sector, which includes incentive systems to improve employee´s performance. Regarding financial rewards, we would expect that masculinity societies prefer monetary rewards tied to performance because individuals in masculine societies focus very strong on material success, and therefore, the implementation of this NPM-like initiative might be “successful” in masculine countries. Finally, the focus on output controls might also be more appropriate in masculine cultures owing to the fact that feminine societies put less, or no emphasis on achievement or competition. We also have to keep in mind, however, that an aspect like monetary rewards can interact with elements from other dimensions.
4.3 NPM and Uncertainty Avoidance
34 because for them the future remains essentially unpredictable and it causes anxiety. This dimension is related to the New Public Management characteristic of emphasize on disaggregation of units in the public sector. The “successful” delegation of authority to managers might be influenced by the level of uncertainty managers feel about the future, which might influence e.g. their decision-making and planning. Furthermore, this dimension is related to the NPM characteristic of greater competition in the public sector. People might have different levels of confidence in the future, which might affect their attitude with respect to increased competition and the effective implementation of this NPM-like initiative.
35 expect that in cultures with a low index of uncertainty avoidance the implementation of the New Public Management would happen in a more ordered and rapid way.
Greater competition in the public sector means a more contract based competitive provision of goods with internal markets and term contracts. It refers to a shift towards greater competition between both public sector organizations and between public sector organizations and the private sector (Hood, 1995, p.97). According to Pollitt & Bouckaert (2004, p.31), citizens exert on occasion pressure to public reform because citizens become used to very rapid and customer-friendly transactions in e.g. banks and building societies, and may become progressively more and more discontented with post offices or benefit payment agencies that are slow, inflexible, and inhospitable. So, the aim is to make the public sector more competitive while, at the same time, trying to make public administration more responsive to citizens’ needs by offering value for money, choice flexibility, and transparency (OECD, 1994). However, Hofstede (2001, p.171) indicates that peoples´ confidence in their country´s government institutions is negatively correlated with uncertainty avoidance. That is, low-uncertainty avoidance countries are more trusting on their country´s government institutions while individuals in high-uncertainty avoidance countries tend to feel alienated from the government systems that affect their lives. In addition, Hofstede argues that because we would expect people in high-uncertainty avoidance cultures to be more suspicious of their governments, we would expect people to be less “believing” in their responses to reform. In that case, we would expect that the probability of stress on discipline and parsimony in resource use in high-uncertainty avoidance might be lower than in countries with low-uncertainty avoidance. In addition, rivalry as the key to lower costs and better standards (Hood, 1995, p.96) might lead to downsizing, that is, to rationalizing the public sector in order to achieve a smaller and more cost-effective public service. It might cause resistance in cultures with strong public sector unions e.g. Greece. In Ecuador, reforms negatively affected public sector unions. The new reforms propose a strong state and protector of the rights of people and the environment, but at the same time, reforms might open the door for a reduced role for the trade union, which focuses on the collective and less on individuals, and collective bargaining for public sector workers. In that case, we might expect that the introduction of the NPM-like initiative of stress on discipline and parsimony in resource use might be more “successful” in the future.
36 implementation of this NPM-like initiative might be more accurate owing to the fact that they are not reluctant to risk, have not a strong need for clearly defined structures with many rules, and they are more flexible. In addition, this cultural dimension is related to the stress on competition in the public sector, which means a greater competition between both public sector organizations and between public sector organizations and the private sector. Citizens exert on occasion pressure to public reform because citizens become used to very rapid and customer-friendly transactions, and therefore, this NPM-like initiative might be “successful” in low-uncertainty avoidance countries. In high-uncertainty avoidance cultures people have a tendency to be more suspicious of their governments; therefore, we would expect people to be less “believing” in their responses to reform. However, high uncertainty avoidance societies that want to introduce NPM should emphasize the improvement of structures that induce citizens to participate in the process of reform to improve the acceptance of the NPM and the confidence in governmental institutions. This could be achieved by planning and prioritizing the service through a variety of mechanisms, e.g. better complaints systems and user panels, among others (Pollitt &Bouckaert, 2007, p.166).
4.4 NPM and Power Distance
Hofstede´s cultural dimension of “Power Distance” reflects how a society deals with inequality. It is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally (Hood, 1994, p.2). Therefore, it is the degree to which unequal distribution of power and wealth is tolerated (Jones, 2007, p.4). This dimension is related to the NPM characteristic of “Hands-on professi“Hands-onal management” in the public sector. Individual´s accountability might be different in societies where people try to be as powerful as possible than in countries where power distance is low. In addition, it is related to the NPM characteristic of emphasizing disaggregation of units in the public sector. Giving line managers in government units authority and responsibility means empowerment of managers. This requires empowerment elements that might be different in low- or high-power distance cultures. Finally, “Power Distance” is related to stress on discipline and parsimony in resource use. In addition to empowerment elements, public organizations managers in low-power distance cultures might have more efficient ways to work with their subordinates to create competitive advantage than managers in high-power distance cultures.
