AN INFLUENCE OF CULTURE ON MANAGEMENT ACCOUNTING PRACTICES AND RESEARCH

 An Influence of Culture on Management (Accounting) Practices and Research

Presented by Profesor  Susunu Ueno, MBA., DBA. From Konan University, Kobe, Japan.  He is the President of Asia-Pacifi Management Accounting Association (APMAA).

Cultural Perspectives Described in Management Acoounting Studies: (1) Cultural perspectives in management and accounting studies; (2) Geert Hofstede’s cultural dimensions; (3) Ueno’s cultural studies; (4) National and organizational cultures: a conceptual framework.

Cultural Perspectives in Management and Accounting Studies

In research, culture is an important component in terms of analysis, interpretations, and thoery building.  In management and accounting articles, culture is often part of the research framework.  Culture may be viewed as a cause and/or an effect in theses articles.  Major research concern here is how national culture should be operationalized.  In practice, cultural perspective have important implications especially in a multinational environment.

Geert Hofstede’s Cultural Dimensions

Let’s look at the Hofstede’s cultural dimensions briefly.  His research is most widely referred to in management cultural studies.  Dr. Geert Hofstede conducted the most comprehensive study of how values in the workplace are influenced (different) by culture.  While working at IBM as a psychologist, he collected and analyzed data from 116.000 individuals from 50 countries, twice 1967—1968 and 1971—1973.  Hostede developed a model that identifies four primary dimensions for differentiate cultures.  He later added a fifth dimension, long term orientation (Hofstede, 1980, 2004).

Hofstede’s four cultural dimensions: (1) Power Distance Index (PDI), is the extent to which the lss powerful members of organizations accept that power is distributed unequally. (2) Individualism (IDV), in individualistic societes, the ties between individuals are loose.  In collective societies, people are integrated into strong, cohesive in groups.  (3) Maculinity (MAS), versus feminity, refers to the distribution of roles between genders.  The assertive pole has been called ‘masculine’, and the modest, caring pole ‘feminine’.  (4) Uncertainty Avoidance Index (UAI), deals with a society’s tolerance for uncertainty and ambiguity.  In unstructured (novel, unknown) situations, people wich uncertainty avoidance minimizes uncertainty by strict laws and rules, and safety and security measures.

Cultural dimensions by countries:

Country	PDI	IDV	MAS	UAS
Japan	54	46	95	92
USA	40	91	62	49
Malaysia	104	26	50	36
Indonesia	78	14	46	48
Germany	35	67	66	65
Italy	77	48	56	40
China	80	20	66	30

Indonesia has the largest Muslim population of any country in the world with 88% of their populatio practicing the Muslim faith.  Muslim countries’ scores Power Distance Index (PDI) and Uncertainty Avoidance (UAI) are high but Individualism (IDV) is low.  Islam demands from its believers that they establish peace in the world, promote love and make such examples of themselves that others, knowing that they are Muslims, feel at peace and harmony in that knowledge.  This is the true Islam and what it means to be a Muslim.

Indonesia has one of the lowest world rankings for individualism (IDV).  The score on this Dimension indicates the Indonesian society is Collectivist.  This is manifest in a close long term commitment to the member ‘group’, is that a family, extended family, or extended relationships.  Loyalty is a collectivist culture is paramount, and over rides most other societiey fosters strong relationships where everyone takes responsibility for fellow members of their group. 

Ueno’s Cultural Studies

Using Hofstede’s framework: The influence on budget control practices in the USA and Japan, An empirical study.  Ueno developed his conceptual framework by using Hostede’s cultural dimensions.  He focused on IDV Index and UAI Index that show broad differences beteen USA and Japan.  Then, he hypothesized the influence of culture (IDVD and UAI) on six aspects below budgent control practices USA and Japan companies. (1) more formal communication and coordination (USA.IDV). (2) longer time horizon in budget planning (Japan, UAI).  (3) Greatly structure budget planning process (Japan, UAI).  (4) build more slack into budgets (USA, IDV).  (5) Gretaer controllability of budget (USA. IDV).  (6) Less long term evaluation time horizon (USA, IDV).

Country	PDI	IDV	MAS	UAI
Japan	54	46	95	92
USA	40	91	62	49

 Japan high in MAS and UAI.  USA high in IDV.  To test hypotheses, Ueno collected data through mail questionnaires from 70 manufacturing comanies in the USA and 149 such companies in Japan.  It should be noted that findings of Ueno’s study are derived by managers (respondents)’ perception.

The results of data analyses indicate that Individualism-Collectivism dimensions explains well about why the USA companies, compared to the Japanese companies tend to: (1) communication and coordination more extensively. (2) buld budget slack to a greater esxtent. (3) practice controllability of budget to a greater extent.  (4) use long term performance evaluations to a lesser extent.  Two hypotheses developed relying on Uncertainty Avoidance were not accepted.  Those hypotheses posited that Japanese companies: (1) have longer time horizon in budget planning. (2) greatly structure budget planning process.

Some comments on Hofstede dimensions and indexes.  (1) As with any generalized study, the results may or may not be applicable to specific individuals or events.  (2) Hofstede’s results are categorized by country.  However, often there is more than one cultural group (heterogenous societies) within that country.  Differences at sub cultural level (organization, group, etc) and at individual level are also observeb.  (3) Hofstede’s score were measured at 2 points (1967—1969 and 1971—1973) and do not reflect the dynamism of a culture (longitudinal perspective).  (4) The individualism dimensions is highly correlated with the level of countries’ wealth.  The relative nations’ wealth has changed overtime.  It implies Hofstede’s indices can become outdated, thus making them inaccurate for current use.

National and Organizational Cultures: A Conceptual Framework.

For elaborating our conceptual framework, need to examine the relationship below carefully.  National culture and organizational culture, any interaction or correlation?  National culture and organizational culture with corporate performance and organizational effectiveneess, any interaction or correlation?

Cultural conversion within a company.  National culture with organizational culture in a multinational enterprise (MNE) context culture of headquartersà culture of subsidiaries: (1) organizational culture of multinational corporation (MNC) is acculturated between headquarters and local organizations accross country (2 way). (2) transfer of parent company nationals (expatriates) facilitate acculturation in overseas units.  (3) IT and business solutions used throughout organization units in MNCs such as SAP R3 have facilitated uniformity of management practices across countries.  (4) Dissimilatities in national culture are slowly fading away due to globalization although there are still numerous profound differences in cultural values.

Enculturation and acculturation.  Is it effective to employ enculturation and acculturation for explaining MNCs’ cultural traits at national and/or organizational levels?  What are they? Enculturation (socialization) is the process where is the process by which a person learns the requirements of the culture by which he or she is surrounded, and acquires values and behaviors that are appropiate or necessary in that culture.  Acculturation entails two way process of change.  Original cultural patters of either or both groups may be altered, but the groups remains distinct (Kottak, 2007).  If enculturation is first culture learning, the acculturation is second culture learning.

Popular research methods in international business research.  Ying, et al. (2006) surveyed 1.296 empirical articles published in six leading international business journals from 1992 to 2003 with respect to data collection methods, sample source including sampled countries and subjects, sampling methods, sample size, and response rate.  The result showed that: (1) mail quisionnairre surveys dominate empirical reserach.  (2) 60,9% of the studies use a one country sample (88,9% from western countries).  (3) 33,7% of the studies are based upon sample frames provided by third parties.  (4) The median sample size is 180 with an average reponse rate of 40,1%.

Toyota Way: A Management PracticeObserved in a Large Japanese Manufacturing Company

Panasonic (Matsushita) was japanese indutry’s role model in 1960s and 1970s.  Konosuke Matsushita (1994—1989), the founder of Panasonic, was called the God of Management.  Toyota went up a number 1 japanese manufacturing company in 1990s when the motorization in Japan reached at its final stage.  The company has been the Japanese indutry’s role model since then.

Toyota Culture: A Model of J-type Management

Liker, et al., (2008) said the heart and soul of Toyota Way are (1) selecting employees for life (life time employment).  (2) Developing competent and able people (OJT, etc).  (3) Engaging component and willing people in continuous improvement.  (4) Work groups and team problem solving.  (5) Two way communication and visual management.  (6) Slow promotion and rewards for teamwork (seniority system).  (7) Hoshin Kanri (a type of management by objective).

J Type Management has been descibed by the folloeing 3 pillars of human resources management (1) lifetime employment; (2) seniority based wages/salaries; (3) Company Labor Unions.  In J Type Management (Companies), workers’ discipline, hard work, and dedication to their respective companies are unquestionable.  Full time permanent employees prioritize their careers over their families for the good of company.

Toyota’s Company Philosopy and Principles

Toyota Motor Corporation (TMC) has positioned the stable long term growth of corporae value as a top priority management issue.  Toyota has sought harmony between people, society, and global environment, as well as the sustainbale development of society, through provision of innovative and high quality products and services that lead the times.

Toyota’s guiding principles: (1) honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world.  (2) Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities.  (3) Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.  (4) Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.  (5) Foster corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management.  (6) Pursue growth in harmony with the global community through innovative management.  (7) Work with business partners in research and creation to achieve stable, long term growth and mutual benefits, while keeping ourselves open to new partnerships.

Toyota Way

Toyota Way is an integrated socio technical system that comprises Toyota’s management philosophy and practices.  The underlying principles are outlined by Toyota as: (1) Continuous improvement: (a) Challenge, we form a long term vision, meeting challenges with courage and  creativity to realize our dreams.  (b) Kaizen, we improve our business operations continuosly, always driving innovation and evolution.  (c) Genchi Genbutsu, go to the source to find the facts to make correct  decisions.  (2) Respect for people: (a) Respect, we respect others, make every effort to understand each other, take responsibility and do our best to build mutual trust.  (b) Teamwork, we stimulate personal and professional growth, share the opportunities of development and maximize individual and team performance.

Genchi Genbutsu means go and see for your self.  It is an integral part of the Toyota Way.  Actually looking and being the workplace both activity ‘snapshots’ and ‘work process’ to observed in their full context.  This makes theory generation and decision making relvenat, therefore more powerfull and better understood.  It is also increase the chance that actual issues and unplanned events will be observed first hand can be managed immediately.

Toyota Production System (TPS) has Just In Time (JIT) System, Kaizen (continuous improvement), and Total Quality Control (TQC) as its companies.  Traits of TPS: (1) The company has focused on shop floors.  (2) Small circle activities lead activities of Kaizen, TQC, etc.  (3) In designing, Toyota has been using Design-in (a cooperative designing of parts and modules with suppliers under long term transactions.  (4) In costing, Toyota is a pioneer of Target Costing.

Chief Officers and Managing Officers

On site operations, Chief Officers, who are directors, serve as the highest authorities of their specific operational functions while non board managing officers implement the actual operations.  The above system was introduced in 2003 and encompass various operational functions accross the entire company.  Based on Toyota’s phylosophy of empashizing developments on the site, the chief officers serve as the link between management and on site operations instead of focusing exclusively on management.  The system enables the management to make decisions directly with n site operations, by reflecting on site personnel opinions on management strategy and swiftly implementing management decisions into actual operations (genchi genbutsu).

Toyota’ governance policy and structure, Company with corporate auditors.  Policy: working ensure fair and trasparent corporate governance by emphasizing frontline operations and multidirectional monitoring.  Directors, 29 persons, with respect to our system regarding directors, we believe that it is important to elect individuals that comprehend and engage in TMC’s strenghts, including commitment to manufacturing, with an emphasis on frontline operations and problem solving based on the actual situation in the site (genchi genbutsu),  TMC will consider the appoinment of outside directors should there be suitable individuals.

Toyota’s Recall Issues  

Over the past decades, people thought Toyota’s practices at shop floor and assembly lines to be almost perfect.  What recall issues at Toyota was: (1) Sticking pedal accelerator recall.  (2) potentially floor mat interference with accelerator pedal recall (November 2009).  (3) Software glitches linked to brake problems in 2010 Prius and other.  The issue is how all the parts work together.

Cars now use more electronics.  Digital electronics use more software.  For electronics, quality is largely designed at the design stage.  With phases of product life cycle does quallity make at?  Committed (planned) quality versus realized quality.  A similar concept of life time costing: (1) Quality review, similar to cost review, should start from product development stage.  (2) In today’s electronics age, emphasis shoul be moved from the production stage to the R & D and design stage.

Diagnosis and treatments: Toyota’s recall issues.  From prediction management to product management.  (1) Toyota Way of “accumulation of small improvements” has turned out to be insufficient in the stage of complex electronic cars.  Cars now use more electornics.  Digital electronics use more software.  (2) The issue at hand is the trade off between complexity and safety in an age in which electronics and computers dominate the vehicles.  Has Toyota been too much aggresive to utilize new techologies?  (3) Toyota Way needs o be refined to cope with the age of electronic cars.

2011 New Year’s Message for Employees from President Toyoda

(1) Strengthening unity with the 2020 vision.  Toyota wants to be a company that choosen by customers and Toyota wants to be a company that makes customers happy they chose us.  These are the conclusions that i have reached out of the many experiences of the past year.  (2) Year to enhance regional management.  We should not use the logic that Toyota has developed for Japan. Rather, we want each region to create its own vision and strengthen its own local managemen.  (3) An Individualized Toyota Way with face is improvement.  Last year, our attitudes was issued,  This year i would like to take step forward and incorporatee our attitudes into your own workplaces and the jobs of each individual, so as to practice My Toyota Way.  (4) Achieving earning and crreating a strong base of monozukuri.  Toyota’s production facilities have all established a solid foundation of monozukuri.  To be more specifin, at each of our locations is a mechanism or culture for achieving long term human resources development, focusing on OJT to train people in skills, professional ablities and technical expertise; a concentration of suppliers with excellent quality and delivery times, or a just in time logistics network.  (5) For the refurgence of Toyota.  Unfortunately, last year’s challenges will continue.  But that does not mean we should be pessistic.  We have the culture to do that.  We have the solidarity and the ablity to focus, which we proved last year, in our efforts to restore profitability and in our response to the US Congres hearing February 24, 2010.  We have the technology, as demonstrated in our hybrids, and we have the practical practical skills for responding to changes in production.

Discussins

Social Dynamism and  A Strereotyped J Model

The Japan of today is no longer the Japan of the past.  Changes in mindset workers and managers.  With the burst in the bubble economy in 1990, the limitations and problems of life time employment and seniority based wages/salaries become questioned.  When the economic downtown continued for 2 decades, downsizing companies’ staff and replacing full time workers with part timers happened frequently.  Attitudes towards have changed so much, and quality of life now plays a more vital role than work life.  Maintaining the three pillars is very costly.  However they are still maintaned in large companies in rewarding loyal full time employees.  Do the evidences imply the termination of J Type management in Japan?

Year to Enhance Regional Management

2011 New Year’s Toyota’s President Message.  I have said repeately that in controlling different regions, we should not use the logic that Toyota has developed for Japan.  Rather, we want each region to create its own vision and strengthen its own local management.  Because Toyota is MNC, it must be “the most admired company in town” in each of the different  regions it serves.  While the head office will look out over the world and determine the basic direction of “what to do”, our basic approach will be to leave “how to do it” up to local organization or those that are familiar with local circumstances.  Locus of decision makings (desentralization and integration), transfer of parent company nationals versus delegation of decision authority to locally employed managers.

Beyon Enculturation and Acculturation

Effort to enctulturation (toward a homogeneous organization?) Increasing CEOs and management personnel who truly share Toyota Way is very important.  Effort to acculturation (allowing heterogeneity in a company?) While expatriate personnel with adequate cultural knowledge of the host country do contrinbute to the MNCs’ control ability, those without cultural knowledge do not.  An individualized Toyota Way with a face is important: (1) Improved quality of life; (2) Improved customer satisfaction; (3) Improved performance.

Expatriatte managers and MNC’ ablitiy to control international subsidiaries. According to Yongsun and Junhoon (2004) building upon the notion of behavioral means of control, this paper contends the level of cultural knowledge of expatirates plays a critical role in determining the effectivness of expatirates as a means of control over international subsidiaries of MNCs.  An empirical investigation with a sample of Japanese MNSs indicates that while expatriate personnel with adequate cultural knowledge of the host country contribute to the MNC’s control abllitiy, those without cultural knowledge do not.

Are Hofstefe’s Cultural Dimensions and Scores Effective? 

Some questions for future studies: (1) how can one apply Hofstede’s Cultural Dimensions for explaining Toyota Culture and/or Totoya Way? How about situational factors are? Have you considered of longitudinal effects in your study?  (2) In the other word, what explanatory power do Hofstede’s Cultural Dimensions have in the context of Toyota?  (3) How do we evaluate explanatory powers by Hofstede’s Cultural Dimensions?  (4) Hofstede collected data from IBM, and the derived cultural dimensions of host countries in 1967—1969 and 1971—1973.  Societies are dynamic, and culture change gradually over time, is it only a snapshot?

Business Research for Academicians in Indonesia

Presented by Grahita Chandarin, Profesor from Merdeka University Malang.  Member of Asia-Paacific Management Accounting Assocition.

Business Researh is defined as an organized, systematic, data based, critical, objective, scientific inquiry or investigation into a specific problem, undertaken with the purpose of finding answers or solutions to it.  In essence, research provide the necessary information that guides managers to make informed decisions to succesfully deal with problems (Sekaran, 2010: 3).

Type of business research are (1) Basic/fundamental/pure research, research done chiefly to make a contribution to existing knowledge. (2) Applied research, research done with the intention of applying the results of the findings to solve specific problems currently being experienced in an organization (Sekaran, 2010: 5—6).

The Hallmarks of scientific research: purposiveness, rigor, testability, replicabillity, precission and confidence, objectivity, generalizability, parsimony.

Type of research funded by DP2M Dikti: Hibah Pasca, Hibah Fundamental, Hibah Bersaing, Hibah Kompetensi, Strategi Nasional, Hibah Desertasi, PKM, etc.

Type of research funded by Directorate of Human Resources, Directorate General of Higher Education, Ministry of National Education: Program of Academic Recharging (PAR). PAR A is designed for the Indonesian Graduate School Administrators (Pejabat struktural, 1—2 minggu).  PAR B is designed for senior lecturers (Profesor and/or Ph.D.) undertaking academic recharging (penulisan buku, seminar,visiting profesor, 3—4 bulan). PAR C is designed for lectures (Ph.D. holder) undertaking research collaboration with their counterparts overseas.

Program Insentif funded by Miistry of Research and Technology: Insentif Riset Dasar (Basic Research Incentive); Insentif Riset Terapan (Applried Research Incentive); Insentif Peningkatan Kapasitas Iptek Sistem Produksi (Incentive for Information Technology Capacity Improvement for Production System); Insentif Percepatan Difusi dan Pemanfaatan Iptek (Incentive for acceleration of diffusin and use of Information Technology).

Osaka Foundation of International Exchange (OFIX) Scholarship: Researh for Student Program,  for Master Program, and Doctoral Program.  Established for liberal arts, economics, finance and management. Biotechnology and nanotechnology. 

Disarikan dari: Seminar Internasional dengan Topik “An Influence of Culture on Management Accounting: Pranctices and Research”.  Universitas Merdeka Malang, 10 Maret 2011.