Creating Cultural Changein a Swedish-HungarianJoint Venture

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The joint venture(JV) Larsson Technika between Swedish multinational Larsson and Hungarian company Nagy Technika signed in 10 was the culmination of a long, historical involvement in Hungary. Larsson has been present in the Hungarian market since 111. The JV was meant to be long term and both foreign and local partners seemed to have similar goals and to believe strongly in the long term benefits and positive future of the company. The idea was to combine Hungarian experience and creativity with the Swedeish top-level technology to achieve bold goals within short period of time.

It seems that this JV was very succesful. Employees were very positive about past achievements and had very high confidence in the future. The family-like environment was supportive and friendly. The company was using a large number of benefits showing that it cared about employeess. The strong technical expertise was gradually transferred to the JV and everything seemed to be all right but there were some concerns that should be taken into account and resolve if the company is to be succesful in the future.

The first problem concerns sharing responsibility.

There were Swedish managers and technical staff in 1 in Hungary but the intention was to transfer technical and managing expertise to Hungarian managers in order the Swedish expatriates would eventually withdraw.




Larsson managers were trying to avoid ethnocentric attitude � they took the larger share of managerial responsibility but Hungarian managers were generally learning to take more initiative and responsibility. Swedish managers were trying not to impose anything on their Hungarian partners and for example personnel policies were very flexible and could be modified to match the needs of the Hungarian workforce. The key positions in the JV were held by Hungarians and expatriates had strong international experience or Hungarian roots.

But there was a problem with sharing of power among managers at various levels. Senior managers seemed to need more trust people reporting to them in order to give them more decision making authority. Mid-level managers were also discouraged by the fact that their ideas were inheeded and senior managers seemed not to be interested. Some mid-level managers had also feeling that they were theoretically given responsibility for their areas but they lacked real decision making authority.

There was also another problem connected with the mentioned one. The JV took place just after the year 10 which brought big changes to Hungarian economy but it also changed all aspects of life in Hungary. Before, during the period of communist system, there were almost only state-owned companies in which there were very low expectations for performance, workforce was not motivated, “moonlighting” was considered normal and decision making process took long time. Moreover people tended to avoid responsibility as after all, all important decisions were taken centrally. So the process of transformation meant for Hungarian empoyees complete change of work-style, which like all major changes needed time to be well adopted. Moreover because the system of education and national culture, young people were taught rather not to say anything unless they were completely sure that was true that they were right. It additionally increased the avoidance of taking risk and responsibility � because it would require to take decisions which results were not sure � these people were simply not used to that.

I think that senior managers should trust more their employees and give them more real decision making authority not only theoretical responsibility. It is the only solution of the problem how to teach young , Hungarian managers to take responsibilities. To be pro-active and creative the young Hungarians need to feel they are trusted even if they sometimes make mistakes. They have to feel that senior managers are supportive and interested in their ideas and that they appreciate their efforts.

Inclination of senior managers to retain power for themselves mean lack of confidence for mid-level managers and is the additional factor which discourage Hungarians from taking responsibility- they were afraid of possible failure, don’t feel confident and avoid tough decisions. But on the other hand they have all skills and capabilities to trust them they are well-educated, hard working and keen to work in “western style”. To provide them with stronger self-confidence and to diminish their uncertainty avoidance they should be given appropriate training. The method of workshop or training group and various kinds of simulations seem to be appropriate in this situation. It wouldn’t be very costly for the company and could increase self-confidence and proactiveness of young managers.

Another possibility would be to send them for a certain period of time to Sweden to show them how things are run there and how work their Swedish counterparts. These could have also good effects but would be more expensive and moreover, managers would not be able to work at the time of training.

To enhance confidence of senior managers in their subordinates a kind of outward-bound type trip could be organised. That would make them work together and really trust each other, because good and friendly atmosphere at Larsson Technika altough is very positive seems to be a little superficial. I think that young Hungarian managers would accept such an idea with pleasure but it could be expensive for the company.

Another possibility would be to find a kind of common hobby, for example establish a sport team in which senior managers as well as managers from lower levels would play together, to enhance teamwork attitude and willingness for participation. A drawback of this solution is that it would have to be organised after work and some employees can treat it as intervention in their private life.

Beside it seems to be necessary to organise regular, brainstorming meetings for managers from all levels to enable them to present their ideas, discuss it and to assure that they would be listened by managers from higher levels.

I would recommend to conduct a “ mini” survey among managers which possible solution would suit better their needs and to choose the best method that way.

Next problem is connected with company’s culture.

Generally employees were satisfied with the company and had strong feeling that it cared about them(health examinations, excursions, social, human and cultural care), there was family friendly atmosphere and friendly contact with both senior and mid-level managers. Overall employees responded positively to good social policies and minimising lay-offs.

But some Hungarian managers felt that too much “Larsson way “ was being imposed at Larsson Technika and that Swedes wanted to make the “clone” of Larsson in Larsson Technika. There was a lot of positive factors in “Swedish way” such as making people responsible, sharing information going accross organisation chart, but for the personal and human side there is a strong need to adapt it to the local culture, because even the best factors imposed on people in the wrong way against their will won’t bring good results. Some Swedish managers despite their international experience seem not to have enough cultural sensitivity. Hungarian managers complain that they feel often treated like “natives just down from the trees” and that the expatriates act like “ white face” in Africa. Such behaviour enhance dostance between HCN and PCN which makes the situation more difficult. Especially because Hungarian people are very proud and conerned about their dignity. They can easily feel offended by being treated that way, and their confidence and respect can be difficult to regain. Hungarians are able to recognise technical and economical gap between their country and Sweden but they won’t accept to be treated like the worse sort of people just because the have grown up in such conditions. Swedish managers on their part complain that Hungarians are not very international and don’t know how to behave well abroad. But how they can do it? They couldn’t go abroad for western countries during the whole period of communism, so where they were supposed to learn it? But on the other hand they were well-educated, willing to change and flexible. I personnaly know these young people from Hungary, Czech Republic or Poland who started their professional career in 10s. They are very ambitious, hard working and highly motivated. And probably they put much more work to be the kind of people they are than their Swedish counterparts taking into account much more difficult economic and social situation in their country. I think that Swedish managers should recognise it, especially because of the fact that Larsson has been present on the Hungarian market for a very long time, so the company’s managers Have been able to notice all difficulties, changes and opportunities in Hungarian reality.

I think that because Swedish managers lack cultural sensitivity they need to know more about about last 0 or 0 years of Hungarian history and how it might have affected culture and people attitude to work- to be able to understand better their partners behaviour. As far as methods are concerned the form of classes or readings&online material seem to be suitable. That shouldn’t be neither difficult nor expensive and can help additionally to show Hungarians that expatriates are interested in their history and culture which would be appreciated for sure by HCNs. The worst thing the Swedish expatriates could do was to show HCNs that they feel superior. The Hungarians are very proud and have strong sense of dignity so such a behaviour can destroy relations and make communication between Hungarians and Swedish impossible for the long period of time. I think they should have received such a training before their departure, to be able to avoid many mistakes. As I have mentioned such a training shouldn’t be neither expensive nor difficult and can be very useful. Moreover I think that expatriate managers should try to learn Hungarian language, especially those who were supposed to stay in Hungary for the longer period even if it wasn’t necessary to communicate with empoyees (the company’s language was English). Hungarian employees would appreciate it as a sign of respect and openess to their culture and apart from that that could be useful for exaptriates in everyday life and would enable to dimish their isolation.

Communication

Altough various mechanisms of exchange of information existed at Larsson Technika there was still room for improvement. Even at the senior managers levels, managers indicated that they didn’t know about intended strategy or policies for the venture. Online managers wanted to know about their employees contracts, salaries and allowances, which means that there was weak communication between departments. As there was strong rivalry between mid-level managers, they were not willing to share information- on the contrary they were trying to hide it, which was hidering the effectiveness of the whole company.

First of all I think that meetings which gather managers from all levels should be organised on a regular ( weekly, monthly) basis. They should be well organised and assure participation of all members, and should not last too long . As I mentioned, that would give managers possibilities to express their concerns and ideas and to discuss it. But to be efficient such meetings should be well organised and that need was also expressed by some managers at Larsson Technika Perhaps it would be good solution that everybody should prepare some key points for the most hot topics which they think should be discussed at the particular meeting. Such propositions should be submitted before the meeting and most frequently indicated or most interesting issues should be chosen for discussion. Quite short intensive meetings should be always finished by obtaining a kind of solution for discussed problems. That would convince people that such meetings are usefull and are not just waste of time, which attitude frequently occur in many companies. Such meetings might also allow more open dialogue, and can be an opportunity to present changes which have occurrred in the company and reasons for them . Then managers would be able to pass this information to their direct subordinates through for example departamental meetings. The company’s newsletter might be also useful to inform employees about company’s strategies, policies and changes which have occurred or which are to occur.

The communication between the departments also leaves a lot of room to improvement. The online managers should know about compensation package of their direct subordinates. Such information can be very useful while choosing a method to motivate employers, because it would enable managers to know their needs, what they have and if not what prefer to obtain.

From my point of view they should receive an outline of compensation policy from HR department in form of reading for example plus information about contracts, salaries and allowances of their direct employees. They should also know which incentives they can use ( financial and non-financial) to motivate and reward their subordinates. It seems that well prepared meeting with the relevant person from HR department would be sufficient meens to pass this kind of knowledge.

Another problem was with sharing information- the rivalry especially in mid-level manager group was so strong that managers didn’t want to share information, everyone wanted to be succesful and clever alone. It revealed a need to create stronger sense of teamwork and participation.

They could find a common hobby- as I have mentioned- create a kind of football team for example (or other sport) in which everybody could play senior managers with mid-level managers and ordinary employees. That would enhance a sense of teamwork and make all people work together and rely one on another. A kind of meetings (in restaurants or pubs) after work could be also organised. This would allow employees to get know better one another and when we know other people there is much easier for us to trust them and rely on them. However, there are some disadvantages of this solution employees can feel that company ingerate in their private life and some people may simply don’t like sport or prefer to stay at home with family in the evening. Still, I think that as far as young Hungarian employees( usually single) are concerned ( and the company’s policy was to employ young people) they would like both ideas. Another solution would be to create teams and reward employees on the basis of team performance. It would enhance colaboration and sharing information within teams but there is a danger of creating competition between different teams which the company would certainly like to avoid. I would start with creating a sport teams and organising meetings in the evenings, and if it didn’t work I would look for solution in company structure (creating teams for example). The selection process could be also improve. Currently, while recruiting company emphasised technical expertise and ability to communicate in English. As a result a lot of young managers and employees were unhealthy ambitious individualists. From my point of view an additional criterion should be introduce teamworking capabilities. It would improve the process of sharing information and create a stronger sense of participation but it would certainly more difficult to find such employees as nobody’s perfectJ. To sum up I think that that is a role of senior managers to start this process to show employees that they appreciate teamworking, that they are open and attentative and interested. They should create strong positive corporate culture and then these values would be passed on other workers.They were usually young and inexperienced so would they tend for sure to perceive their bosses not only as bosses but also as mentors � so they would be usually willing to imitate their style

Next issue concerns performance appraisal.

Performance review and bonuses of expatriates were decided in Stockholm. Senior expatriates were not even asked about performance of those expats who reported to them.

From my point of view they should be evaluated both by Swedish bosses and by their Hungarian partners. While evaluating by Swedish there should be taken into account their some specific criteria apart from achieving individual goals how do they cope with communication with Hungarian employees, with decision making process, managing intercultural teams but also their cultural sensitivity and understanding, whether they know how to transfer “Swedish way” values to the Hungarian employees, and how to make them accept it. It seems that a kind of 60’ evaluation would be suitable in this case. Senior expats would receive feedback from their Hungarian subordinates and other senior Hungarian managers in terms of their managerial but also cultural skills. The evaluation would be more objective and complete. Mid-level Swedish managers would be evaluated by their Hungarian boss, other managers and subordinates. It seems to be impossible to evaluate young mid-level Swedish manager who’s working in Hungary from Sweden without even asking his direct Swedish boss in Hungary about his performance. The drawback of this solution is that may be expensive and it takes quite a lot of time. That is also doubtful whether Hungarian employees would accept this system they may not want to evaluate their boss as power distance is traditionally much higher in Hungary than in Sweden. One possible solution would be to put appraisal system into company’s intranet. It would cut costs and save time, but in that case the human contact would be lost. On the other hand we are usually more honest while contacting via computer than face to face, so the collected date could be more credible. To sum up I would involve more people in appraisal of expats to be able to evaluate not only their financial results but also cultural and communication skills.

As far as the performance appraisal of Hungarian employees is concerned altough they were generally aware of the goals for their jobs, they seemed less aware of what they required to be rewarded and receive feedback. There was no performance appraisal system because the Larsson’s one was perceived as too complicated.

But there was no need to copy performance appraisal system from Larsson. From my point of view there was a need to create new simple and transparent PA system (one for the whole company) at Larsson Technika. As employeees were aware of their objectives there should be clarified the link between performance and rewards. They were not used to be pro active after the period of communism but now they should be told that taking initiative, responsibility and being creative are required to get reward. Of course it is not enough to be told that so their objectives should be very clear and designed in such a way that achieving them would require from employees taking responsibility and initiative. The appropriate bonus system would be also useful in increasing motivation of people. As employees were very positive towards having progress reports there should be regular appraisal interviews which apart from delivering feedback would be a chance for more open dilalogue and discussion between employees and their bosses.

There is another problem linked with perfomance concerning compenstation system and rewards.

There was a need to design appropriate bonus system to increase motivation of employees to achieve excellence in production and service. Hungarian employees were generally satisfied with their salaries which were higher than average. Job satisfaction was link for them to work place, training opportunities, job rotation abroad and travel and pride in being Larsson employee. The bonus system should be as objective as possible altough I know that is not easy. There should be objective performance criteria for each employee so that they know that after achievieng a certain level of performance they would get bonus. The other issue is that these bonuses should be adapted to employees’ needs. I think that there should be conducted survey among employees on what they would like to receive as a bonus and a set of available bonuses should be established( for example money, time off or a foreign trip or training or others) The employee who would be entitled to get a bonus would be able to choose the one which he/she would like the best. Such a system would be probably accepted by employees but it has some disatvantages. In some cases, for example in an extremely hot period for the company it would be impossible to give an employee additional time-off or send him/her for training abroad. But still, I think that employees should be able to get a bonus suitable for them if the bonus system is supposed to work. I really like company’s policy which gives employees various forms of benefits and non-monetary recognition. It create strong positive attitude and pride in being an Larsson employee. What I can add is that altough I don’t know particular needs of Hungarian employees, I would like to stress that these benefits and non-monetary incentives should be also designed to match the needs of employees.

Last problem concerns training and enhancing learning at organisational level.

Altough training received high priority in the JV some managers mentioned that they needed more advanced technical and management training.

It seems to be good solution to send some managers to Sweden for not very short period of time ( as expats?) where they would improve not only technical skills but also they could learn “Swedish/Larsson way” and than after coming back they could implement it at Larsson Technika. Another advantage of this solution is that Hungarian employees would be probably more willing to adapt even the new system implemented by Hungarian than by foreigner. Some disatvantages this solution is expensive and there is a need to replace manager who has gone abroad. Still I think that a few managers should go not only for a short trip to Sweden but for longer period of time.

Another solution would be more in-house technical training at Larsson Technika provided by trained people from Larsson. It would be certainly cheaper and would allow managers to work and learn at the same time. As far as managerial skills are concerned, company could enable for example MBA studies for its best managers (and pay for it). Also quite expensive and takes a lot of managers’ time but good as motivating factor � employees would appreciate developing opportunities.

As high number of surveyed employees ( 58%) mentioned they would like more training in foreign languages, there is a need to establish good system of learning languages-especially Enlgish. English was the company’s language so the ability to speak this language fluently were crucial to be able to communicate and work efficiently. Altough ability to speak English was one of the basic recruiting criteria, there is always room for improvement. The training should take form of classes and the performance should be taken into account during perfomance appraisal ( to ensure efficiency of training � as often when you don’t pay for something you don’t respect it). Classes in Swedish should be also available altough everybody in a company was able to speak English it could be symbolic gesture towards Swedish culture and making people understand better each other. It can be also useful for managers who had opportunity to go to Sweden as expats in the future. It shouldn’t be very expensive ( altough all kinds of training are expensive) and may be organised after work so that employees could work and learn at the same time. Another advantage of it is that they would pay more attention to such a course as it would take their free time.

As employees indicated that learning new skills occurred more on the job than in the classroom (which is probably one of the best method-“learning by doing”) there should be more emphasis on this kind of training ( as majority of employers were engineers and had strong technical background). But it would make situation more difficult for managers who felt pressured having to balance between training employees and achieving established objectives. It’s hard to say right know where is the “gold middle”, whether more towards training or achieving objectives. The one thing is sure the fact that managers have to train their employees while trying to achieve ambitious goals should be taken into consideration during performance appraisal.

Conclusion

As there is no perfect company and ability to constant development is nowadays one of the most important conditions to win with the competition, there is always room for improvement.

But I think that after all Larsson Technika turned out to be really succesful joint venture and as it was wriiten in the case “had more than met initial expectations”. It proved that combination of two cultures can give good effects altough there were some problematic areas. This case is a little bit old , a lot of things have changed during last 1 years in Hungary and I don’t know the current situation of the company, but I think that it should be succesful.



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