Cross-Cultural Competence of Personnel as One of the Key Success Factors of a Multinational Company in Globalization

Vision 2020: Sustainable Economic Development and Application of Innovation Management Cross-Cultural Competence of Personnel as One of the Key Success Factors of a Multinational Company in Globalization Alexey V. CHERNOV, Associate Professor, RUDN University Victoria A. CHERNOVA, Senior Lecturer, RUDN University Abstract As the globalization process is gaining its influence and novel technologies are rapidly developing, the very nature of modern organizations is becoming more dynamic, innovative and eager to cooperate on the international level. Nowadays intercultural communications become a crucial element of progressive companies’ activities. These activities inevitably lead to a range of crosscultural issues due to differences in behavior, mindset and values of those coming from different cultural backgrounds. Under the circumstances of international business, cultural differences sprout misunderstanding and confusion, which eventually leads to poorer performance of an organization as a whole. Therefore, cross-cultural competence in international business environment becomes as vital as the professional one. The goal of the present work is to investigate the influence of cross-cultural competence on personal performance of employees in multinational companies. Keywords: globalization, world economy, cross-cultural competence, communications, personal performance, international business environment. international Introduction Since the beginning of the 21 century pace of globalization has increased dramatically and today we have to live and function within the framework of global economy. Every day the number of organizations rises, which seek new markets for selling their products, new suppliers, capable of providing components or raw materials for a competitive price or aiming to hire employees who have the qualifications required. Many of these companies happen to be quite successful under the global market conditions, though others fail. One of the key factors of such failures must be the lack of cross-cultural competence – the person’s ability to act effectively in the framework of another culture. (Gerzen, 1990). While having a high level of personal performance in business activities within national markets, employees may face a range of difficulties within the international business environment due to the level of cross-cultural competence being insufficiently developed. (Trompenaars, 1994). Employees and even managers are often unable to understand the culture of their foreign counterparts, which in its turn leads to lower effectiveness of business cooperation with international contractors (Ricks, 1999). Today executives of a modern organization should take cultural context into consideration in order to increase the effectiveness of intercultural communications (Von Clinow et al., 2004). Moreover, cross-cultural competence is undoubtedly a competitive advantage for those employees who would like to make a career in a multinational company or a company that operates in foreign markets. In order to achieve high performance indicators within the international business environment, executives of modern organizations should treat formation of cross-cultural competence of their employees with greater responsibility. However, in a real-case scenario, most of the multinational companies pay virtually no attention to assessing and developing cross-cultural competence because there are no concrete definitions of cross-cultural competence components, which makes it difficult to assess the competence. The aim of the present research is to consider the effect cross-cultural competence has on personal performance of employees in multinational companies. 6891 Vision 2020: Sustainable Economic Development and Application of Innovation Management Definition of cross-cultural competence Back in 1990 in his research aimed at studying the peculiarities of executives’ activities in multinational organizations working abroad, Gerzen presented one of the earliest definitions of crosscultural competence as an ability of a human being to effectively operate within the conditions of a different culture (Gerzen, 1990, p. 346). However, it is worth mentioning that this definition seems somewhat vague and too general. In the works of Black and Mendenhall one cannot also find a properly formulated definition, though we can trace a link between formation of cross-cultural competence and acquisition of certain knowledge and skills: “Cross-cultural training enables the individual to learn both content and skills that will facilitate effective cross-cultural interaction by reducing misunderstandings and inappropriate behaviors” (Black and Mendenhall, 1990, p.120) In 2001 Hofstede narrows down the definition of intercultural competence. According to him, it resides in “a set of abilities, knowledge, attitudes and skills” (Hofstede 2001) which one can develop, though such development is almost always limited by personal attributes of an individual (p. 428). One of the most comprehensive definitions of cross-cultural competence so far is the one given my S. Apud and his colleagues, who believe cross-cultural competence to be an ability of an individual to effectively exploit the set of knowledge, abilities, skills and personal attributes under the conditions of international business environment, while interacting with representatives of different cultures (Apud et al., 2006). Formation of cross-cultural competence is influenced by such personal attributes as values, norms and beliefs, character traits. Knowledge and skills include information about peculiarities of other cultures, command of foreign languages and a range of certain abilities and skills. It should be specified that formation of cross-cultural competence is greatly affected by cultural distance (which is defined as a general difference between a “hosting” national culture and culture of the country where subsidiaries and business partners operate) and institutional ethnocentrism (which is defined as the expansion of workplace policies of the ‘hosting” culture upon representatives of other cultures (Hofstede, 2001). The above-mentioned factors combined can create significant difficulties in work of executives and employees that operate within international business environment. Therefore, cross-cultural competence is the ability of an individual to apply a certain set of knowledge, skills and personal attributes to effectively interact with representatives of different cultures on the national as well as international levels. Research Methodology The present research consists of two stages. In the first stage cross-cultural competence of 362 graduates coming from 11 countries who had been studying for their Master’s degree at the Economics department of RUDN (Peoples’ Friendship University of Russia) for four years from was assessed. The average age of the trainees assessed was 25 years. The authors chose the expert evaluation method as the primary assessment approach. The list of cross-cultural competences, reflecting the personal attributes of an individual, his/her knowledge and skills as well as evaluation criteria is given in Table 1. In case of an assesse being completely unable to meet the requirements of a certain competence, he/she receives 0 points for the competence given. In order to maximize accuracy and minimize the human factor, the assessment was carried out by three experts. 6892 Vision 2020: Sustainable Economic Development and Application of Innovation Management Table 1: Cross-cultural competencies evaluation criteria CC-1 Competence description Awareness of intercultural differences as necessary elements of coexistence CC-2 The ability to social adaptation and changing position in terms of the socio-cultural context Competence Nr CC-3 Ability to self-evaluate and reflect in the context of intercultural interaction Ability to empathy and tolerance CC-4 Possession of business and foreign language CC-5 CC-6 Possession of ways to create a non-conflict, comfortable psychological environment in the context of intercultural interaction Ability to communicate and cooperate CC-7 CC-8 Knowledge of cultural differences in intercultural interaction, awareness of cultural identity CC-9 Ability to apply knowledge of the main types of national business cultures and their characteristics in professional life CC-10 Ability to make decisions in terms of intercultural interaction Competence evaluation Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Fully match Mainly match Partially match Value 3 2 1 3 2 1 3 2 1 3 2 1 3 2 1 3 2 1 3 2 1 3 2 1 3 2 1 3 2 1 Source: Prepared by the authors The evaluation of each competence was made by the following formula: n С Сi = ij j =1 n where C is the evaluation of the competence, i – the number of the competence, n – the number of experts. The cross-cultural competence was evaluated as the sum of all the competences according to the formula: m C =  Ci i =1 6893 Vision 2020: Sustainable Economic Development and Application of Innovation Management Using this assessment method the authors were able to acquire a quantitative evaluation of such a qualitative factor as cross-cultural competence. Based on the assessment results, three groups of graduates were formed, according to the point sums: group A (‘Cross-cultural competence has been formed completely”) - 21-30 points; group B (“Cross-cultural competence has been partially formed”) - 11-20 points; group C (“Cross-cultural competence has not been formed”) - 0-10 points. Exploiting this assessment method for cross-cultural competence of a person allows one to create an individual radar diagram of cross-cultural competence (Figure 1). Such a diagram allows one to visualize assessment results for each competence an also facilitates easier comparison with benchmark metrics. The second stage of the present research involved assessing performance results and determining personal performance levels of Master’s degree programme graduates at the Economics department of RUDN, whose cross-cultural competence levels had been determined in the first stage of the research and who were working in 142 multinational companies. The personal performance assessment was carried out by immediate superiors of those employees who operate professionally within the international business environment. CC-1 CC-10 CC-9 3 2.5 2 1.5 1 0.5 0 CC-2 CC-3 CC-8 CC-4 CC-7 CC-5 CC-6 Fig. 1: Example of cross-cultural competence map Source: Prepared by the authors Research Results The results acquired via the cross-cultural competence assessment procedure have shown that the level of Group A (fully formed cross-cultural competence) corresponds to 49 per cent of the people assessed, the level of Group B (partially formed cross-cultural competence) corresponds to 21 per cent and the level of group C (cross-cultural competence hasn’t been formed) – 30 per cent. The assessment results are presented in Table 2. Table 2: Studied group cross-cultural competence assessment results Cross-cultural competence level Group A Group B Group C TOTAL Number of graduates 153 64 101 318 Source: Prepared by the authors 6894 Percentage 48 20 32 100 Vision 2020: Sustainable Economic Development and Application of Innovation Management Figure 2 represents the ratio of formed and immature elements of the cross-cultural competence – personal attributes, knowledge and skills. 90 80 70 60 50 40 30 20 10 0 Personal attributes Skills Identified Knowledge Unidentified Fig. 2: The ratio of identified and unidentified elements of cross-cultural competence Source: Prepared by the authors 81 per cent of the group assessed have been able to demonstrate the required level of knowledge, 73 per cent have managed to demonstrate the level of skills required and 63 per cent do have the set of personal abilities, necessary for effective professional performance within the international business environment. The correlation between cross-cultural competence and the native culture is shown on the Figure 3. 62 per cent of representatives of the Russian Federation have demonstrated cross-cultural competence. 88 per cent of Europe representatives could demonstrate the certain level of crosscultural competence. A sufficient level of cross-cultural competence formation has been demonstrated by 76% of the studied group from China. 48% representatives from Central Asia have cross-cultural competence. For Middle East this indicator is 34%, for Africa – 91% and 83% for other regions. Russian Federation Central Asia China Africa Европа Middle East Others 0 20 40 Cross-cultural competence not evaluated 60 80 Cross-cultural competence evaluated Fig. 3: Correlation between cross-cultural competence and native culture Source: Prepared by the authors 6895 100 Vision 2020: Sustainable Economic Development and Application of Innovation Management While examining the employment results of the group under consideration the following outcome has been determined (Table 3). Table 3: Correlation between cross-cultural competence and employment in international companies Cross-cultural competence level Group A Group B Group C TOTAL Number of graduates 178 76 108 362 Number of graduates working in international organizations 118 34 24 176 Percentage of working in international companies 66 45 22 Source: Prepared by the authors 118 representatives of the group with fully formed cross-cultural competence (Group A) were able to acquire positions in multinational companies (an organization is considered multinational if it operates in the international business environment) which constitutes 66 per cent of Group A. 28 people with partially formed cross-cultural competence (Group B) were employed by multinational organizations, which is 45 per cent of the group. Similar results for Group C corresponded to 24 people and 22 per cent respectively. 60 per cent of people from both Groups A and B were able to find employment in multinational companies. Nevertheless, not all the representatives of the group investigated who have been employed by multinational companies are involved in international activities. Results for investigating the involvement levels for international activities among the group representatives are given in Table 4. Table 4: The number of representatives of the studied group involved in intercultural interaction The level of the Number of Cross-cultural Number of graduates involvement in representatives of competence level working in international organizations international interaction the studied group Group A 118 Group B 34 Group C 24 involved partially involved not involved involved partially involved not involved involved partially involved not involved TOTAL Source: Prepared by the authors 93 23 2 25 6 3 7 8 9 176 Among the 118 representatives of Group A: 93 are engaged in international activities, 23 people are partially engaged and 2 are not engaged. Among the 34 representatives of Group B: 25 people are involved in international activities, 6 are partially involved and 3 people are not involved. From 24 representatives of Group C 7 and 8 people are engaged and partially engaged in international activities respectively. Table 5 provides correlation between cross-cultural competence formation and personal performance of an employee working in a multinational organization and being engaged in international activities. 63 employees of 116 representatives of group A involved in international activities demonstrate high level of personal performance, 31 of them demonstrate the average level and 22 – low level. For the 6896 Vision 2020: Sustainable Economic Development and Application of Innovation Management 31 representative of Group B involved in international activities the similar performance levels correspond to 15, 11 and 6 people respectively. Among those from Group C involved in international activities four employees have high level of personal performance, six employees demonstrate average level and six – low level of personal performance. Table 5: Correlation between the level of cross-cultural competence and the level of personal efficiency Cross-cultural competence level Number of graduates involved in international interaction Group A 116 Group B 31 Group C 15 The level of personal efficiency high medium low high medium low high medium low TOTAL Number of representatives of the studied group 63 31 22 15 11 6 4 6 5 176 Source: Prepared by the authors Discussion and Conclusions The data acquired during the research indicate that such components of cross-cultural competence as personal attributes were identified in 63 per cent of the group members assessed. This confirms the results gained within the research conducted by Apud et al. (2006) suggesting that personal attributes represent the most difficult aspect in terms of cross-cultural competence formation. They depend heavily upon the “native” culture of a person and one cannot teach them in the course of specialized training sessions, whereas a certain level of knowledge and skills in the cross-cultural sphere can be formed. This fact is confirmed by the cross-cultural knowledge and skill levels determined within the group assessed: 81 and 7 percent respectively. It is also worth mentioning that, according to the research by Leiba-O'Sullivan (1999), personal attributes affect the development of knowledge and skills. Moreover, a strong correlation between the “native” culture of the group members assessed and their cross-cultural competence level has been determined. A relatively high result (62 per cent) in the field of cross-cultural competence demonstrated by the graduates from the Russian Federation can be explained by the fact that Russia is a multinational and multicultural country, where 194 nationalities co-exist. The representatives from Africa have shown the highest level of cross-cultural competence. However, one cannot say that Africans in general have high level of cross-cultural competence and in our case the sample appears to be biased as the graduates assessed were representatives of the upper and upper-middle class – well-educated and highly motivated to further their training. It can be claimed that all the representatives of this region have their personal intercultural personal attributes well-developed thus being able to efficiently acquire intercultural knowledge and skills. As for the European representatives, 88 per cent of the group assessed have demonstrated high level of crosscultural competence. This relatively high result can be explained by modern values and traditions of the European society, which is open for cooperation with representatives of various cultures and has great potential in terms of acquiring a sufficient set of specific knowledge and skills. When assessing cross-cultural competence of the graduates from Central Asia, 48 per cent of the group representatives demonstrated sufficient level of cross-cultural competence. This result can be attributed to high level of cultural ethnocentrism and relatively low level of foreign language command. The same reasons explain the research results for the representatives of the Middle East. 6897 Vision 2020: Sustainable Economic Development and Application of Innovation Management Only 34 per cent of the Master’s degree programme graduates from this region were able to show sufficient level of cross-cultural competence. Quite surprising results were gained when assessing cross-cultural competence of the representatives of China - sufficient level of the cross-cultural competence was determined for 76 per cent of the Chinese representatives, despite a significantly high level of cultural ethnocentrism. The representatives of all the regions were trained according to the same education programme, interacted in the same multicultural environment and demonstrated different levels of cross-cultural competence. This confirms Earley’s research (2002:277), which results indicate that many training programmes in the field of intercultural cooperation fail as they are mainly focused on knowledge associated with the culture, while paying less attention to the behavioral aspect of the cross-cultural competence. While analyzing the data acquired when exploring further employment of the Master’s degree graduates, a strong correlation between an individual’s level of cross-cultural competence and his/her ability to find employment in a company operating in the international business environment. 66 per cent of the graduates with fully formed cross-cultural competence and 45 per cent of the graduates with partially formed cross-cultural competence were able to gain employment in multinational companies, whereas the same criterion of those with immature (not formed) cross-cultural competence was merely 22 per cent. It should be highlighted that this ratio stays more or less the same throughout all the regions investigated: the difference is 1-3 per cent depending on the country. This result corresponds with the hypothesis that cross-cultural competence can serve as a competitive advantage for those professionals who seek a career in multinational companies. However, not all representatives of the researched group working in multinational companies are engaged in international activities. In order to study relation between the cross-cultural competence level and level of personal performance for multinational organization employees who actively operate in international environment, we looked upon the number of graduates who are involved in international activities as well as the level of their involvement. The data acquired signify that 116 of 118 graduates with fully formed cross-cultural competence are involved in international activities. Similar ratio for the graduates with partially formed cross-cultural competence is 31 out of 34, and 15 representatives of Group C (cross-cultural competence has not been formed) out of 24 are engaged in such international activities. This results confirm the assumption that the level of cross-cultural competence of an employee has a strong correlation with his/her level of involvement in international cooperation and provides us with accurate data that should be taken into consideration when analyzing personal performance of the assessed group. The assessment results for personal performance vividly demonstrate rigid correlation between one’s cross-cultural competence and one’s personal performance when performing one’s duties. 54 per cent of the Group A members who are actively engaged in international cooperation were able to demonstrate high level of personal performance, 26 per cent of them showed average performance levels. The same criteria for Group B are 48 per cent and 35per cent, for Group C – 27 per cent and 40 per cent respectively. Obviously one cannot claim cross-cultural competence being a universal success factor in business (Apud et al., 2006 p. 526), though the trend seems apparent: with lower level of individual’s cross-cultural competence, his/her personal performance level does also decrease. Summing up the results of our research we can drive the following conclusions: 1. Individual’s personal attributes represent the biggest challenge in terms of cross-cultural competence formation, while these attributes greatly affect acquisition of cross-cultural knowledge and skills. 2. The level of cross-cultural competence has a rigid correlation with the “native” culture of a person, as the “native” culture affects formation of his/her personal attributes. 3. 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