management style and productivity in two cultures

Management Style and Productivity in Two CulturesAuthor(s): Tom Morris and Cynthia M. PavettSource: Journal of International Business Studies, Vol. 23, No. 1 (1st Qtr., 1992), pp. 169-179Published by: Palgrave Macmillan JournalsStable URL: http://www.jstor.org/stable/154889 .

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MANAGEMENT STYLE AND PRODUCTIVITY IN TWO CULTURES

Tom Morris* and Cynthia M. Pavett** University of San Diego

Abstract. Global competition has motivated an increasing number of United States firms to set up production facilities in Mexico. This study examines productivity and management style differences in a Mexican maquiladora operation and its U.S. parent plant. Likert's System 4 Theory was used as the theoretical basis of comparison. As hypothesized, significant differences were found in the management systems while productivity at the two facilities was equal.

Mexico is one of the fastest growing "production sharing" countries in the world [McCray and Gonzalez 1989]. In response to international competitive pressures and the fact that the U.S. has one of the highest average direct labor rates in the world [World Development Report 1989], hundreds of U.S. companies have taken their labor-intensive operations to Mexico. Labor costs are lower in Mexico than in the U.S. and quality of output can be maintained [Gruben 1990]. Currently, there are more than 1,300 Mexican production facilities or "maquiladoras" [Jarvis 1990] along the two-thousand mile U.S.- Mexican border. The rapid increase in the use of Mexico as a production partner has occurred in part because of the Mexican government's liberalization of certain tariff laws and laws pertinent to foreign ownership of manufacturing enterprises [Gruben 1990].

Maquiladoras are Mexican production facilities that use raw materials, which have been temporarily imported, to manufacture or assemble products in Mexico [Greene 1989]. The materials are moved back and forth across the border tax free and duty free, allowing U.S. companies access to inexpensive Mexican labor. While the U.S. is not the only country using maquiladoras, it is estimated that U.S.-owned plants account for between 65%-98% of all maquiladoras in Mexico [Greene 1989]. Although these plants are owned and often operated by U.S. nationals, business customs, business laws, appropriate

*Tom Morris (Ph.D., University of Denver) is Assistant Professor of International Business at the University of San Diego School of Business. Current research interests include the management of foreign subsidiaries and international technology transfer.

**Cynthia M. Pavett (Ph.D., University of Utah) is Professor of Management at the University of San Diego School of Business. Her present research is primarily on the topic of international comparative management.

Received: February 1991; Revised: June 1991; Accepted: September 1991.

169



170 JOURNAL OF INTERNATIONAL BUSINESS STUDIES, FIRST QUARTER 1992

human resource practices, culture and values differ significantly between the two countries [Jarvis 1990; Stinson 1989; Kras 1989; Kras and Whatley 1990]. As a logical outcome of these differences, it seems that the predominant management style within a maquiladora should also differ from the style employed by the U.S. partner.

The purpose of this paper is to compare management styles and productivity of a U.S. plant and its maquiladora subsidiary in Mexico. The general hypothesis is that the management styles used in the two plants will differ as a reflection of cultural differences. The following discussion on culture and management styles provides a rationale for this general hypothesis.

Culture

Many management theorists and researchers contend that management styles are culturally determined and hence vary markedly from culture to culture (e.g., Aram and Piriano [1978]; Burger and Bass [1979]; Kras [1989]; Wright [1981]). While there are a number of recent cross-cultural studies (e.g., Baird, Lyles and Wharton [1990]; Black [1990]; Elias [1991]; Kras [1989]; Kras and Whatley [1990]; Lie [1990]; Posner and Low [1990]; Masters and Gibbs [1990]; Vertinsky, Tse, Wehrung and Lee [1990]) that examine managerial attitudes, adjustment, risk taking, values and organizational design norms, only two such studies look at management style in Mexico. Elias [1991] published a brief report of her consulting work that compared U.S. and Mexican managers across six skill areas. This very ethnocentric study indicated that Mexican managers needed skill training. The second study, conducted by Kras [1989] and summarized in Kras and Whatley [1990], is quite instructive since it takes a relatively objective look at the Mexican culture, its management-related practices and values, and its predominant management styles. In her observational and interview-based research, Kras describes the cultural norms of both U.S. and Mexico as they relate to differences in managerial behavior. Earlier psycho-cultural work, such as that of Ramos [1962], and the later work of Condon [1985], corroborate most of Kras' cultural observations. While her research is purely descriptive and lacks the benefit of a theoretical model for describing managerial behavior, it is unique because of its focus on management-related cultural differences between the U.S. and Mexico. Consequently, her research will be used to describe some of the salient cultural differences that serve as the basis for the hypotheses of the present study.

According to Kras [1989], family life in Mexico is more important than it is in the U.S., where work often takes priority over the family. Within the Mexican family, the father is the undisputed authority figure. It is the father who makes the major decisions and sets disciplinary standards. While children are protected and loved, they are very dependent on both the moral support of the family as well as the authority figure to make the decisions. As a result, the maturing child entering the work place expects supervisors to



MANAGEMENT STYLE AND PRODUCTIVITY 171

make the decisions, take responsibility, and assume all accountability. In essence, the employee expects father-like behaviors. In contrast, the U.S. father is not unquestionably the sole wielder of family authority. Authority is often shared with the mother who is frequently employed outside the home. This family structure contributes to the values and behaviors of self-sufficiency, independence and individualism that are admired in the U.S. society. Young American workers display a readiness to question, criticize and change those things they dislike in society or the work place and can therefore be characterized as low on authoritarianism. Unquestioning acceptance of orders and dependence on a father-figure type of supervisor are not typical in the U.S.

This observation on the authoritative orientation of Mexico and the U.S. is corroborated by Condon [1985], Ramos [1962] and the multi-country cross- cultural research of Hofstede [1980]. Hofstede found that, in comparison to the other countries he studied, the U.S. ranked relatively low on power distance whereas Mexico ranked fairly high. Power distance is a measure of the extent to which less powerful members of organizations accept the unequal distribution of power.

Management Styles

In addition to examining cultural differences, Kras' research desctibed differences in what was defined as "management styles." Included in this eclectic definition were: traditional managerial functions of controlling, staffing, and planning; work values such as work/leisure and loyalty; and macro-level practices such as centralization, training, and development. Within this broad spectrum of organizational behaviors, numerous cultural differences emerged from Kras' interviews. For example, Mexican executives indicated that there is no tradition of delegation of authority. Power and authority are concentrated in the upper levels of the organization. In contrast, U.S. executives described much less autocratic work environments. Mexican executives were portrayed as much more loyal to the organization than Americans.

Likert's System 4

Likert's System 4 Theory of management was developed from data that were collected from thousands of managerial personnel in hundreds of different organizations [Likert 1967; Likert and Likert 1976]. The theory is named after an ideal model of how to run an organization. Four different broad styles of management have been identified by Likert as forming a continuum, with autocratic, task-centered leadership at one end and demo- cratic, participative, employee-centered at the other. The autocratic end of the continuum represents System 1; the participative end of the continuum is called System 4. Table 1 provides the names of all four systems and a brief description of the key components of each system. It should be noted that the systems are described in terms of six managerial or organizational




dimensions: leadership, motivation, communication, decisions, goals, and control. According to Likert, the type of management system prevalent in an organization can be determined by having organizational members fill out a diagnostic questionnaire called the Profile of Organizational Charac- teristics [Likert 1967]. Likert's survey, which will be described below, was administered in both the U.S. and Mexican-maquiladora plants.

Based upon the above discussion on culture, management style, and Likert's theory, it is hypothesized that the Mexican organization will be significantly more authoritative [tend toward System 1] than its U.S. counterpart. This hypothesis will apply to both the overall management system and the six individual dimensions that define the system.

Organizational Productivity

According to Likert and his colleagues, organizations should strive to become System 4 organizations because they are the most productive. He suggests that a participative management system, or a System 4, will be more productive in any culture [Likert and Likert 1976].

Contrary to Likert, we and most contingency theorists argue that there is no "universal" management system. Management systems reflect cultural differences. It is suggested that efficient systems are dependent upon cultural factors. Even though the system may differ from country to country, effi- ciency and productivity do not necessarily vary as a function of these differences if the system is compatible with the culture. This view is supported by several researchers and theoreticians. For example, Oberg [1963], an early cross-cultural researcher, flatly states that "a universal claim [that one management system is superior] is hardly warranted by the evidence." Our contention is that a participative management system is not necessarily a more productive system. What is important, however, is that the management system fits the cultural context. If the system is appropriate, then similar organizations in different cultures could use very different management systems and be equally productive. This contention reflects the systems theory notion of equifmality [Katz and Kahn 1978]. Briefly, equifmality states that a system can reach the same final state from differing initial conditions and by a variety of paths. Therefore, in contrast to Likert's theorizing, it is also hypothesized that there will be no statistical differences between productivity levels of the two plants. This hypothesis reflects the culture-management style match notion because the factors (other than management systems) that determine differences in productivity between the two organizations have been minimized due to the nature of the participating organizations.

METHOD

Our research was designed not only to use a theoretical model but also to take advantage of a "naturally" occurring cross-cultural comparative situation- a parent plant and its subsidiary. Specifically, the present study uses Likert's




TABLE 1 Description of Likert's Four Systemsa

System Description Scale Value

System 1 The system utilizes an autocratic, top-down approach to 0-4.9 Exploitative leadership. Employee evaluation is based on punishment Authoritative and occasionally on rewards. Downward communication

is predominant and there is little lateral interaction or teamwork. Both control and decisionmaking reside at the top levels of the organization. (Likert hypothesizes mediocre organizational performance for the System 1 style.)

System 2 This system is similar to 1 but management tends to be 5.0-9.9 Benevolent more paternalistic. Employees are given a little more Authoritative freedom than in System 1. Management defines the

limited boundaries for interaction, communication, and decisionmaking.

System 3 Employees have more interaction, communication and 10.0-14.9 Consultative decisionmaking than in System 2. Although employees

are consulted about problems and decisions, management makes the final decisions. (Likert hypothesizes "good" productivity for this type of organization.)

System 4 This system makes extensive use of employer 15.0-20.0 Participative participation, involvement and groups. The groups are Group highly involved in setting goals, making decisions, improving

methods and appraising results. Communication occurs both laterally and vertically. The linking-pin concept is used. (Likert hypothesizes high levels of productivity).

aScore of 0-4.9=System 1; 5.0-5.9=System 2; 10.0-14.9=System 3; 15.0-20.0=System 4.

System 4 Management Theory to compare management styles of U.S. and Mexican managers working in virtually identical plants-one in Mexico, the other in the U.S.

Participants

The two plants used in this study were owned by a U.S. multinational corporation that produced labor-intensive, disposable plastic products. Both plants produced identical products. The Mexican operation was modeled exactly after the U.S. operation. The parent organization believed that the best way to assure a smooth transition of technology was to avoid introducing any changes in the production process. Consequently, a great deal of effort was made to exactly duplicate the operating policies, product design, raw materials, manufacturing methods, tooling, type of facility, work place layout, test fixtures, packaging, and training. For example, all tooling and fixtures used in Mexico were utilized and validated in the U.S. process prior to transfer. All raw materials were purchased from the same suppliers and all training was done by the same bilingual training personnel in both locations.




Each plant employed approximately 120 direct labor personnel. There were forty-three management personnel in the U.S. facility and thirty-seven management personnel in the Mexican facility. Thus, the direct labor-management ratio was very similar. The manufacturing methods were very labor intensive so that the output was operator-paced rather than machine paced. Demographi- cally, the direct labor operators were very similar in terms of gender, age, experience and training. They were predominantly single females, aged 17-24, with two years of experience. All employees received identical training in their respective languages.

Likert's [1976] Profile of Organizational Characteristics survey was filled out during a meeting of all forty-three managers at the U.S. plant. The survey was also filled out by all thirty-seven Mexican plant managers during a management meeting. The survey was translated into Spanish and back- translated to assure identical meaning in both languages. This group included thirty-four Mexican nationals and three American expatriates. The three Americans were included in the survey group because they were key managers who had an impact on the overall management system. The first author personally collected the survey data at each facility.

Survey

The Profile of Organizational Characteristics, which is described in detail in Likert and Likert [1976], consists of eighteen items, each with a 20-point, verbally anchored response scale. Between two and four of these eighteen items are used to measure the degree of participation in each of the six organizational dimensions: leadership (three items), motivation (three items), communication (four), decisionmaking (three), goal-setting (two), and control (three). For example, one of the four items that assesses communication is as follows: "How well do superiors know problems faced by subordinates?". Responses range from 0 (not very well) to 20 (very well). A low score, on the survey, indicates an authoritative orientation (low participation) whereas a high score reflects a participative orientation. According to Likert, organizations are classified into one of four systems based upon the linear summation of the eighteen items.

The Likert survey was selected for use because it had previously been validated in a large-scale study at General Motors [Taylor and Bowers 1979]. In addition, Likert's theory, upon which the survey is based, is familiar to numerous management researchers. The survey has been used to measure management systems in the U.S., Western Europe, Eastern Europe, Asia and Latin America [Likert 1976].

Labor Productivity

Labor productivity was defined as the ratio of direct labor hours per unit produced. This definition was used because it is consistent with the company's standard cost accounting system. The data used to calculate productivity for




each organization were obtained from corporate records. Data consisted of a random sampling of fifty days' worth of production data (direct labor hours and number of units produced) from a one-year period for each plant.

RESULTS

Student's t-test and profile analysis were used to examine the hypothesized differences in management systems. Table 2 contains both the results of the t-tests and information about five of the six organizational dimensions. As seen in the first column of Table 2, the internal reliabilities of the system scale and the organizational dimension scales are more than acceptable. Cronbach's alphas [Cronbach 1951] for these scales range from .77 to .94. The internal reliabilities of the subscales for the individual countries are somewhat lower than those of the total sample. These lower alpha scores are expected given the small sample sizes and small number of items per scale. It should be noted that the two-item goal-setting scale produced very low internal reliabilities (total sample=.39, subsamples=.37, and .23) indicating that respondents did not answer the two items in a similar manner. Because of these low reliabilities, this "scale" was dropped from the analysis. However, the two items will be retained as a part of the eighteen-item summation score.

The data in Table 2 strongly support the first hypothesis. Specifically, Mexican managers respond significantly differently from the U.S. managers on the summation of the eighteen survey items. This mean summation score, which represents the plant's overall management system, was significantly higher (t=16.09; p<.001) in the U.S. (12.39) than in Mexico (7.89). According to Likert's interpretation of these scores (see Table 1), the Mexican plant is reported as having a significantly more authoritative management system than the U.S. plant.

Similar results were obtained for the subscales. Across all five scales, the scores from the U.S. managers were significantly higher than those from the Mexican managers. Again, differences between these scores indicate the use of a more authoritative management style in Mexico than in the U.S.

Profile analysis was conducted on the scores associated with the five organizational dimensions to examine the similarity between the response profiles of the two plants. Specifically, we were interested in determining if the profile of means from the two groups were parallel. Profile analysis tests this parallel means (similarity of vectors) hypothesis (hypothesis #1) along with the null hypotheses that: (2) assuming parallelism, there is not a significant difference between the groups on the mean level of the dimensions (differences in vector elevation) and (3) assuming parallelism, there are no significant differences between groups on the individual scales (differences in vector shape) [Bernstein 1988]. A plot of these responses is displayed in Figure 1.




TABLE 2 Likert's Management System and Organizational Dimensions

for Mexico and U.S.

Number a Organizational of Mexico U.S. Dimension Questions Alpha Mean S.D. Alpha Mean S.D. t-valueb

Total Management 18 (.84)c .82 7.89 1.26 .79 12.39 1.20 16.10 System

1. Leadership 3 (.89) .80 8.42 2.04 .72 11.98 1.55 8.63 2. Motivation 3 (.90) .93 8.62 2.27 .84 11.17 1.73 5.52 3. Communication 4 (.77) .84 10.11 1.59 .78 14.03 1.90 10.01 4. Decisionmaking 3 (.95) .82 3.14 1.06 .69 12.87 1.55 33.06 5. Control 3 (.81) .74 7.27 1.53 .77 11.16 1.61 10.85

aScore of 0-4.9-System 1; 5.0-5.9-System 2; 10.0-14.9-System 3; 15.0-20.0-System 4. bAll are significant at p<.001. CAlpha coefficients for the total sample.

Results led to the rejection of all three hypotheses. The multivariate tests of significance led to the rejection of the parallel hypothesis. Exact values for these tests are as follows: Pillais=.80; Hotellings=4.20; and Wilks=.19. All are significant at the .001 (df=4,74) level indicating a lack of parallelism. The test of significant differences between groups on vector elevation indicated that the two plants were significantly (F=243.00; p=.000; df= 1,78) different across the mean levels of the dimensions. Lastly, when examining exactly where (among the five dimensions) significant differences occurred, the results clearly indicated that all five dimensions contributed to the overall difference between the data from the two plants. The F-test values here range from 5.79 (p=.02) to 288.59 (p=.00). Given the lack of parallelism, this profile analysis is, in effect, a simple MANOVA that confirms the results presented in Table 2. The lack of parallelism, however, is informative since it suggests that the differences between the two data sets are not caused by systematic response bias. That is, American managers did not system- atically mark higher numbered responses than did the Mexican managers.

The hypothesis about labor productivity is also supported by data. As indicated in Table 3, the direct labor hours per unit in the U.S. plant is statistically the same as that of the Mexican plant. This number was obtained by aver- aging the daily productivity statistics across the fifty days. Hence, for each of the fifty days, direct labor hours were divided by the number of units produced that day. The resulting means and standard deviations were used to compute a t-statistic.

DISCUSSION

With the increasing popularity of the maquiladora, the issue of how to productively manage Mexican employees has become fairly critical for American managers. In labor-intensive, worker-paced assembly plants, such




FIGURE 1 Organizational Dimensions

Exploitative Benevolent Consultative Participative Authoritative Authoritative Management Management

Leadership I' 1..,,,v,........ .. ......, 1 .1 .,1. I o 5 1 10 15 20

Motivation l I I......... l l l. I

0 5 \1O0 15 20

Communication I l .... ..... . ... \...... o 5 10 / 15 20

Decisionmaking I _-II... I.. o 5 1 1 5 20

Control I................................I............ ... ..................... ............................... 0 5 10 15 20

Mexico U.S._

as the ones used in our study, an acceptable culturally appropriate management system could be a major determinant of success or failure. The way in which employees are managed could give the firm the competitive cost advantage necessary to succeed in a global market or it could contribute to the firm's demise. The implicit assumption here is that the management system will have an impact upon productivity (e.g., Likert and Likert [1976]). Given the validity of this assumption in certain situations, the issue for the American manager is whether or not to use U.S. management techniques/ systems in the maquiladora. The research findings of the present study suggest that U.S. management systems do not necessarily have to be used in the Mexican plant to elicit the same level of productivity as the U.S. Plant.

The management systems that were used in each plant reflect some of the salient cultural differences between the U.S. and Mexico. Americans have been characterized as less accepting of authority, autocratic decisionmaking and unequal power distributions than are the people of Mexico [Hofstede 1980; Kras 1989]. These differences are evident in the relative value or meaning placed upon family, father figure and work. In addition, the cultures vary with respect to the mastery of decisionmaking skills [Kras 1989]. In the work place, American employees are characterized as desiring participation in decisionmaking and as having the training (via the U.S. educational system) to make those decisions. Mexican workers are characterized as expecting an authority figure to make decisions and assume responsibility. Yet, because of the strong family orientation, paternalism is also a desirable




TABLE 3 Comparative Productivity Results Across Fifty Days

Mexico U.S. t-value

Total Direct Labor Hours 23,716.4 Hrs. 23,781.0 Hrs. Total Units Produced 200,531 Units 196,420 Units Average D/L Hours per Unit .118 Hrs.IUnit .121 Hrs.IUnits .88(N.S.) Standard Deviation .0053 .0032

managerial characteristic in Mexico. These cultural differences, in tandem, mirror the results of our study. The managers at the U.S. plant reported using a Consultative system (System 3). In contrast, the managers of the Mexican plant were paternalistic, yet were authority figures as reflected in reported use of System 2 (Benevolent Authoritative) management practices.

While our study does not specifically measure the congruence between management systems and culture, it does suggest that specific elements of the cultures are prominent in the management of the work force. Contrary to Likert and Likert's [1976] intemational findings that "The higher-producing, more successful enterprises, departments, or offices tend to fall toward the System 4 end of the range... ." [p. 89], we found that a System 2 organization was quite productive in Mexico whereas the System 3 was equally productive in the U.S. We maintain that these findings are due to the congruence between management systems and culture in the two locations.

Our conclusions and implications should be interpreted with the following limitations in mind. First, there is the possibility that some significant, unidentified variable, such as managerial experience of the respondents, confounded the results of this study. Second, the study was done within a single multiational corporation (MNC) and its subsidiary. While this subsidiary arrangement represents a typical Mexican-U.S. maquiladora relationship, the results of the study may not be generalizable to all U.S. firms and their Mexican partners.

There are several considerations for work in the future. First, studies looking at management systems should include a large representative sample of Mexican maquiladora operations and their U.S. counterparts. Given a large sample, compansons could be made between Mexican fnns that use indigenous Mexican managers as compared with those firms that use U.S. expatriates. Another interesting and appropriate area of investigation would include a longitudinal study measunrng change in the indigenous management system as a function of industrial development. If interactionist theorists are correct, we would expect a change. Indeed, as the Mexican-U.S. trade continues to grow, Mexican companies have already begun to modernize their management systems. At the same time, they wish to preserve their cultural values. This will undoubtedly result in a unique management system worthy of our continued study.




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